On Friday, America Movil (NYSE:AMX) received an upgrade from Jefferies from Hold to Buy, accompanied by an increase in the price target to $22.22, up from the previous $19.16. The upgrade is based on the company's reduced capital expenditure (capex) guidance for 2024, which is set at $7 billion, a decrease from the $8.4 billion average from 2021 to 2023. This reduction is expected to lead to a significant rise in free cash flow (FCF) generation for the telecommunications giant.
The company's management has confirmed their commitment to maintaining leverage within the range of 1.3 to 1.5 times, noting a leverage ratio of 1.3 times at the end of 2023. With no imminent acquisitions and major 5G spectrum auctions completed, the firm anticipates that the growth in FCF will be increasingly reflected in heightened buyback activity.
According to Jefferies, America Movil's stock has fallen to valuation levels close to 10-year lows, both in absolute terms and relative to its peers. The combination of a lowered capex forecast and a stable leverage ratio, along with the potential for increased shareholder returns through buybacks, has led to the positive outlook and the decision to raise the stock's rating and price target.
The new price target of $22.22 represents a potential upside based on the company's current financial strategies and market position. America Movil, as a key player in the telecommunications industry, is now positioned to capitalize on its strategic investments and operational efficiencies as it continues to roll out 5G technology and services.
InvestingPro Insights
Following the upgrade by Jefferies, America Movil (NYSE:AMX) shows promising signs that are reflected in its financial metrics and market behavior. With a market capitalization of $55.86 billion, the company stands as a significant entity in the telecommunications sector. Its current P/E ratio is 12.05, indicating a valuation that could be considered reasonable in comparison to its earnings. This aligns with the InvestingPro Tips that highlight the company's low earnings multiple.
Despite a revenue contraction of 3.37% over the last twelve months as of Q1 2023, America Movil has managed to maintain a solid gross profit margin of 42.62%. This could be a testament to the company's operational efficiency and cost management strategies. Additionally, the company's dividend yield is currently 2.87%, which is particularly noteworthy considering that America Movil has raised its dividend for 7 consecutive years and maintained dividend payments for 23 consecutive years, as stated in the InvestingPro Tips.
Investors may also find solace in the company's stability, with the InvestingPro Tips indicating low price volatility and a moderate level of debt. For those looking for investment opportunities, the InvestingPro Tips suggest that America Movil is trading at a high P/E ratio relative to near-term earnings growth, which could be a point of consideration. Furthermore, the stock is currently trading near its 52-week low, possibly presenting a buying opportunity for value investors.
For more insights and additional tips, including earnings revisions and liquidity analysis, visit InvestingPro. There are 11 more InvestingPro Tips available for America Movil, which can be accessed with an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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