On Wednesday, Scotiabank reaffirmed its Sector Outperform rating and Cdn$53.00 stock price target on BCE Inc . (NYSE:BCE:CN) (NYSE: BCE), following the company's recent strategic transactions. BCE has completed the sale of Northwestel for around Cdn$1 billion, a valuation that corresponds to approximately 7.5 times its EBITDA and 13-15 times its free cash flow.
Northwestel, which has been characterized by stagnant growth, was divested as part of BCE's strategy to reduce debt and concentrate on markets with less regulation.
In the same timeframe, BCE finalized the purchase of Outfront Media (NYSE:OUT) Canada for Cdn$410 million, in addition to assuming lease liabilities. This acquisition, which is valued at around 8.5 times EBITDA including synergies, adds out-of-home advertising assets to BCE's portfolio. Out-of-home advertising is cited as one of the remaining growth areas in the media sector.
The combined effect of these two deals is expected to have a minimal influence on BCE's leverage and its consolidated revenue growth. Scotiabank has pointed out that the transactions align with BCE's broader strategy and may not significantly alter the company's financial leverage.
The analyst from Scotiabank also highlighted the potential for future value creation through the possible sale of BCE's macro tower assets. Moreover, a near-term catalyst for BCE's stock could be the upcoming decision by the Canadian Radio-television and Telecommunications Commission (CRTC) on fiber-to-the-home (FTTH) regulation, anticipated in late August or early September. The ongoing regulatory review is believed to be a major factor currently affecting the stock's performance.
In other recent news, Alexander Vinnik, the Russian national linked to a significant money laundering operation through bitcoin, has entered a partial guilty plea in the United States. This plea deal, brokered with U.S. prosecutors, is anticipated to result in a prison sentence of less than 10 years. The specifics of the plea agreement, including the exact charges Vinnik has admitted to, remain undisclosed.
In a different development, BCE Inc. reported mixed results for the first quarter of 2024. Despite a minor decline in revenue, the company posted an adjusted EBITDA and margin that surpassed expectations. BCE saw significant growth in its fiber internet services, recording the highest Q1 retail internet net additions in almost 20 years. Still, net earnings dropped due to a severance charge and losses on equity derivatives.
The company also announced new partnerships with Microsoft (NASDAQ:MSFT) and SentinelOne (NYSE:S) to enhance its business enterprise services. Despite a 7.1% decrease in total media revenue due to a one-off subscriber fee adjustment, BCE maintains a healthy balance sheet with $4.7 billion of available liquidity.
The company has reaffirmed its commitment to its financial targets for 2024. These recent developments show a dynamic landscape for both individuals and corporations in the tech industry.
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