On Friday, Scotiabank maintained its Sector Perform rating and a $19.60 price target for America Movil (NYSE:AMX), following news of the Slim family's acquisition of a 3.16% stake in British Telecom through their controlled vehicles, Inbursa and Control Empresarial de Capitales. The investment's purpose is not yet clear, whether it is a simple financial move to capitalize on BT (LON:BT)'s dividends or part of a larger strategic plan that might later involve America Movil.
The Slim family's history with similar investments suggests an initial small stake purchase could lead to an increased position over time. This pattern was observed with their past engagements in companies like KPN and Telekom Austria (OTC:TKAGY). The recent transaction is also seen as a potential diversification strategy for the family, particularly in light of recent developments in Mexico. Such a strategy echoes actions taken around 2013-2014 following significant constitutional reforms in Mexico, which prompted the group to expand its interests in Europe.
The analyst noted that under its new management, British Telecom seems to be moving in a positive direction. However, the upcoming results of the UK's general elections on July 4 could influence the regulatory environment, potentially affecting the telecom sector.
Scotiabank also highlighted the contrast between the traditional telecommunications investments made by the Slim family and recent mergers and acquisitions in the U.S. by companies like AT&T and Verizon (NYSE:VZ). These American firms have chosen to invest in new, disruptive technologies rather than traditional telecom companies such as British Telecom.
In other recent news, America Movil has been upgraded to a Buy rating by Goldman Sachs (NYSE:GS), citing competitive trends and new capital expenditure guidance as potential catalysts for a more favorable investment profile. This follows America Movil's recent announcement of strong first-quarter results for 2024, including a net addition of 1.5 million wireless subscribers and total revenue of MXN203 billion pesos. Despite challenges such as cybersecurity issues in Central America, the company's growth is being driven by its broadband and 5G network expansions in Mexico.
In line with these recent developments, America Movil also confirmed a capital expenditure plan of $7.1 billion to $7.2 billion for the year, focusing on advancing its fiber and 5G infrastructure. The company's successful deployment of 5G in 125 cities in Mexico and ongoing investments in fiber infrastructure are among the bullish highlights. On the other hand, the company experienced a disconnection of 584,000 subscribers in Central America due to a cybersecurity incident.
As part of its future plans, America Movil anticipates continued revenue growth across most markets, driven by bundling and competitive packages. The company is also investing in digital services and network management, particularly in Colombia and Brazil. An upcoming investor day has been scheduled to discuss these strategies and future plans.
InvestingPro Insights
Adding to Scotiabank's analysis, real-time data from InvestingPro shows that America Movil (NYSE:AMX) holds a significant presence in the telecommunications sector with a market capitalization of $51.93 billion and a steady P/E ratio of 16.94, adjusted to 16.26 over the last twelve months as of Q1 2024. This stability is reflected in the company's low price volatility and its role as a prominent player in the Wireless Telecommunication Services industry.
InvestingPro Tips highlight that America Movil has not only raised its dividend for 8 consecutive years but has also maintained dividend payments for 24 consecutive years, with a current dividend yield of 3.04%. This consistency in rewarding shareholders is noteworthy, especially when considering that analysts predict the company will remain profitable this year. While some analysts have revised their earnings expectations downwards for the upcoming period, the company's profitability over the last twelve months and its long history of dividend payments suggest a robust financial foundation.
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