On Thursday, Benchmark analyst lowered the stock price target for Grupo Televisa SA (NYSE: TV) to $11.00, a decrease from the previous target of $12.00, while retaining a Buy rating on the stock.
The adjustment reflects a slight shift due to currency fluctuations rather than a change in the intrinsic valuation of the company. Despite the reduction, the analyst believes there is still significant upside potential for the stock, which he feels is undervalued by the market.
The revision follows the recent financial results of TelevisaUnivision, a joint venture in which Grupo Televisa owns a 45% stake. The results exceeded expectations, with a 5% growth in U.S. advertising revenue, driven by record political advertising receipts.
Moreover, there was a 10% increase in Mexican peso revenue, although this translated to a 1% decrease when converted to U.S. dollars, affected by the performance of the Copa America and the Olympics.
TelevisaUnivision's direct-to-consumer (DTC) business achieved a breakeven point just two years after its launch, contributing to a 4% growth in U.S. dollar Adjusted Operating Income Before Depreciation and Amortization (OIBDA), or 7% growth excluding foreign exchange effects. This performance is notably better than the low single-digit revenue and Adjusted OIBDA growth indicated in the press release dated September 30, 2024.
The joint venture has been working on reducing its leverage, which has seen a decrease in the debt ratio from 6.1x to 5.9x, aided by a $150 million reduction from the sale of a non-core tower portfolio. Additionally, TelevisaUnivision's subsidiary, Univision Communications, has issued $755 million in 8.5% Senior Secured Notes due in 2031, with the transaction closing on October 7, 2024.
The new CEO of TelevisaUnivision, Daniel Alegre, has committed to further integrating operations in the U.S. with Mexico and other markets, as well as expanding the company's insights into the Hispanic consumer market. This strategic focus is aimed at enhancing the company's performance and value proposition in the media and broadband sectors.
In other recent news, TelevisaUnivision is set to announce a leadership change due to performance concerns. The current CEO, who took the helm in 2021, is expected to be replaced by Daniel Alegre, former chief executive of Yuga Labs. The outgoing CEO will likely assume the role of vice chairman and continue as a member of the executive committee on the board.
In a separate development, Grupo Televisa reported on its ongoing restructuring efforts and strategic growth during its second quarter 2024 earnings call. The company highlighted the successful restructuring of its Cable segment, leading to increased profitability and free cash flow. Moreover, Televisa's acquisition of AT&T's minority stake in Sky has strengthened its competitive position.
These recent developments also include the spin-off and listing of Ollamani on the Mexican Stock Exchange and the company's goal to make its direct-to-consumer business, ViX, profitable in the latter half of the year. Despite a 4% drop in profit to $1.61 billion in 2023 and a substantial debt of $9.8 billion, TelevisaUnivision has seen gains in total revenue and advertising revenue.
InvestingPro Insights
To complement the analysis provided, InvestingPro data offers additional insights into Grupo Televisa's financial position. The company's market capitalization stands at $1.22 billion, with a price-to-book ratio of 0.21, indicating that the stock may be undervalued relative to its book value. This aligns with the analyst's view that the stock has significant upside potential.
InvestingPro Tips highlight that Grupo Televisa is trading at a low Price / Book multiple, which supports the Benchmark analyst's assessment of the stock being undervalued. Additionally, the company's liquid assets exceed short-term obligations, suggesting a solid financial position despite recent challenges.
While the article discusses TelevisaUnivision's performance, it's worth noting that Grupo Televisa itself has faced some headwinds. An InvestingPro Tip indicates that analysts anticipate a sales decline in the current year, which is reflected in the company's modest revenue growth of 0.23% over the last twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Grupo Televisa, providing a deeper understanding of the company's financial health and market position.
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