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On Friday, BofA Securities analyst David Wright updated the price target on Liberty Global (NASDAQ:LBTYA) to $12.40, increasing from the previous $10.90, while continuing to recommend an Underperform rating for the stock. According to InvestingPro analysis, the stock appears undervalued at current levels, trading at a notably low Price/Book ratio of 0.31.
Liberty Global’s first-quarter results revealed several challenges, including higher customer churn in the UK and an EBITDA shortfall, accompanied by a reduction in the company’s guidance for its operations in the Netherlands. Despite these challenges, the company maintains strong gross margins of 66.59% and generated EBITDA of $987.9 million in the last twelve months. The analyst pointed out these issues as part of the rationale behind the maintained Underperform rating. Want deeper insights? InvestingPro offers 8 additional key tips about Liberty Global, along with comprehensive financial analysis in their Pro Research Report.
Wright also noted the postponement of the monetization of Liberty Global’s NetCo operation, a decision influenced by the strategic review by Telefonica (NYSE:TEF) expected in the second half of the year. This delay has implications for Liberty’s strategic positioning, as it hinders the company’s plans to leverage NetCo for consolidating UK alternative networks, which could have accelerated its market presence and mitigated line losses for Virgin Media O2 (VMO2).
The analyst expressed concerns regarding the structural challenges faced by Liberty Global due to its legacy cable infrastructure. In the UK, the transition to fiber is proving to be difficult, while in the Netherlands, the migration is not feasible, leaving Ziggo at a competitive disadvantage against KPN.
Despite these concerns and the trimming of associate forecasts, the price objective was nudged slightly upward. This adjustment reflects the impact of the weakening US dollar rather than an improvement in the company’s fundamental outlook. Liberty Global’s strategic and operational hurdles continue to be the focus of BofA Securities’ analysis.
In other recent news, Liberty Global reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The company posted a loss per share of $0.55, with revenue reaching $1.12 billion, significantly below the forecasted $1.92 billion. In other developments, Liberty Global has shown interest in acquiring Vodafone (NASDAQ:VOD)’s stake in the Dutch joint venture, VodafoneZiggo, which could potentially be valued at over €2 billion ($2.2 billion). However, it remains unclear if Vodafone is willing to sell its stake. Meanwhile, BofA Securities has downgraded Liberty Global’s stock outlook, reducing the price target from $13.80 to $11.20 while maintaining an Underperform rating. The firm cited mixed operational performance and a less optimistic outlook for fiscal year 2025 as reasons for the downgrade. Liberty Global continues to invest in fiber networks and AI initiatives, despite the challenges posed by high leverage. Investors will be closely watching Liberty Global’s strategic moves, particularly its approach to infrastructure expansion and debt management.
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