On Wednesday, Scotiabank made adjustments to its financial outlook on shares of America Movil (NYSE:AMX), reducing the price target slightly to $18.90 from the previous target of $19.00. The firm maintained a Sector Perform rating on the stock.
The decision came after a review of America Movil's first half of 2024 financial performance. The company generated equity free cash flow (EFCF) of MXN 41.1 billion, which was a significant increase compared to the MXN 25.0 billion in the same period of the previous year.
Despite this improvement, the EFCF yield in MXN stood at 8.2%, which is lower than the 10.4% yield-to-maturity of the company's 2034 MXN bonds. This comparison suggests that debt instruments may currently be more appealing than equity for investors in America Movil.
Scotiabank pointed out that cash distributions in the first half of 2024 rose sharply to MXN 12.5 billion from MXN 5.0 billion last year. However, the cash yield was still considered very low at 1.5%.
The analyst's estimates for the next twelve months (NTM) EFCF are set at MXN 77.1 billion, which is below the annualized rate from the first half, primarily due to the anticipated re-consolidation of operations in Chile in the second half of 2024 and an increase in capital expenditures for the upcoming year, projected to rise to $7.5 billion from $7.1 billion in 2024.
The report also highlighted concerns about a slowdown in wireless growth in Mexico, which could be a sign of increasing competitive pressure, specifically from Walmart (NYSE:WMT)'s Bait. The updated estimates by Scotiabank, which incorporate the second quarter results, suggest limited potential for stock price increase from its current levels.
Scotiabank's analysis concludes with a neutral stance, indicating no significant changes to their expectations for America Movil's stock performance in the near term.
In other recent news, America Movil has been the subject of several updates from financial analysts. Scotiabank revised its financial model for the company, reducing its price target from $19.60 to $19.00 due to changes in capital and EBITDA considerations for the company's operations in Chile.
On the other hand, Goldman Sachs (NYSE:GS) upgraded America Movil to a Buy rating, citing competitive trends and new capital expenditure guidance as potential catalysts for a more favorable investment profile.
The company recently reported strong first-quarter results for 2024, including a net addition of 1.5 million wireless subscribers and a total revenue of MXN203 billion pesos. As part of its future plans, America Movil confirmed a capital expenditure plan of $7.1 billion to $7.2 billion for the year, focusing on advancing its fiber and 5G infrastructure.
In corporate developments, America Movil has recently increased its ownership to 91% in their Chilean joint venture, ClaroVTR. This strategic move is expected to enhance the company's presence and synergies in the Chilean telecommunications market. Furthermore, the Slim family, controlling shareholders of America Movil, have acquired a 3.16% stake in British Telecom, potentially signaling a diversification strategy.
Despite a cybersecurity incident in Central America leading to the disconnection of 584,000 subscribers, the company's growth is being driven by its broadband and 5G network expansions in Mexico. The company also anticipates continued revenue growth across most markets, driven by bundling and competitive packages.
InvestingPro Insights
According to InvestingPro, America Movil (NYSE:AMX) has demonstrated a commitment to shareholder returns, having raised its dividend for eight consecutive years, and maintaining dividend payments for 24 consecutive years. This consistency is indicative of a stable financial outlook, despite some analysts revising their earnings downwards for the upcoming period. The company's stock is known to trade with low price volatility, which may appeal to investors seeking stability in their portfolio.
In the context of financial metrics, America Movil boasts a market capitalization of $56.49 billion, with a Price to Earnings (P/E) ratio of 16.94, slightly adjusting to 16.77 in the last twelve months as of Q1 2024. The company's revenue for the same period stands at $48.91 billion, although it experienced a revenue decline of 4.43%.
Despite this, the company has been profitable over the last twelve months, which aligns with analysts' predictions that it will remain profitable this year. The dividend yield as of mid-2024 was 2.85%, reflecting the company's ability to generate investor income through dividend payments.
For those looking to delve deeper into the financial health and future prospects of America Movil, InvestingPro provides additional analysis and insights. With the use of the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking even more InvestingPro Tips. Currently, there are 7 additional tips available on InvestingPro to assist investors in making informed decisions about their investments in America Movil.
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