On Friday, Scotiabank adjusted its stance on Millicom International Cellular SA (NASDAQ:TIGO), upgrading the stock from Sector Perform to Sector Outperform and increasing the price target to $37.30, up from the previous $30.00. The revision follows a period of muted stock performance post the Atlas (NYSE:ATCO) offering. The analyst highlighted the company's attractive free cash flow yield, which stands at 14.2% in USD, noting it as one of the highest in the sector.
The upgrade comes amidst a significant reduction in Millicom's funding costs, which have fallen to 6.5% from 10.1% in the fourth quarter of 2023. This improvement in financial conditions is expected to give the company enhanced flexibility. The potential sale of towers could provide Millicom with substantial cash, which might fuel an aggressive share buyback program. This possibility remains even as the company considers retaining its organic Equity Free Cash Flow (EFCF) for mergers and acquisitions activities in Colombia, a process anticipated to conclude in the second half of 2025.
The departure of Mauricio Ramos as Chairman of Millicom is noted, with the incoming Maxime Lombardini expected to continue a strict approach to cost management. The analyst's optimistic outlook is further supported by the strategic shifts within the company's leadership.
In light of these factors, Scotiabank has rolled over its model for Millicom and has set a new price target that reflects a bullish view on the stock's future performance. The analyst's statement underscores the potential for Millicom's stock value to grow, backed by strong free cash flow and strategic financial management.
In other recent news, telecommunications provider Millicom has seen significant developments. The company reported robust Q2 financial performance, with organic EBITDA increasing by 20% and equity free cash flow surging to $268 million. Service revenue rose by 5.5% YoY to $1.36 billion, and EBITDA grew to $634 million, marking a 23.1% YoY growth.
In addition to financial growth, Millicom announced a major leadership change as Maxime Lombardini takes over as Interim Non-Executive Chair of the Board, following Mauricio Ramos's departure. As part of the company's ongoing strategy, Lombardini's appointment comes with the expectation of continued growth and efficiency in operations.
Additionally, Millicom is navigating a substantial $2.4 billion merger and acquisition deal in Colombia, which is expected to consume approximately 18 months of the company's equity free cash flow. This development introduces a degree of uncertainty regarding Millicom's ability to maintain its previous cash distribution policies.
In the realm of analyst notes, Scotiabank has maintained its Sector Perform rating for Millicom, acknowledging these recent changes. Meanwhile, Atlas increased its stake in Millicom to 40.4% from 29.2%, although without securing a majority of voting rights.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.