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On Friday, Deutsche Bank (ETR:DBKGn)’s analyst Lars Vom-Cleff increased the price target for Freenet (ETR:FNTGn) AG (FNTN:GR) (OTC: FRTAF) to EUR39 from EUR36, while maintaining a Buy rating on the stock. The adjustment follows Freenet’s announcement of its financial results for fiscal year 2024, which showed a year-over-year (yoy) revenue increase of 4%, EBITDA growth of 4%, and an uptick in free cash flow (FCF) of 6%. Additionally, the company reported a 7% rise in its subscriber base, significantly bolstered by a 42% surge in waipu.tv subscribers.
The analyst noted Freenet’s performance as a "defensive play in an uncertain economic environment," highlighting the company’s strong financial results. Management is set to propose a record dividend of EUR1.97 per share at the upcoming annual general meeting (AGM), equating to a yield of 6.1%. In line with its "2028 Ambition," Freenet is targeting compound annual growth rates (CAGRs) for EBITDA and FCF of 4% and 5%, respectively. The growth in profitability is expected to be primarily driven by the TV & Media division, which boasts higher margins.
Vom-Cleff also expressed a positive outlook on Freenet’s business model, which is described as asset-light, with long-term customer contracts providing a stable and predictable revenue stream. This foundation is seen as conducive to further up-selling and cross-selling opportunities. The analyst’s new price target of EUR39, combined with an anticipated ~6% dividend yield for fiscal year 2025 and a potential new share buyback program, is expected to yield a total shareholder return (TSR) of approximately 25%.
Freenet’s commitment to returning value to shareholders remains steadfast, with intentions to continue distributing roughly 80% of its FCF to shareholders. This strategy, coupled with the company’s solid financial performance and strategic focus, underpins Deutsche Bank’s optimistic price target and Buy rating.
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