On Thursday, Rosenblatt Securities adjusted its stance on Liberty Broadband (NASDAQ:LBRDA) Corporation (NASDAQ:LBRDK), downgrading the stock from Buy to Neutral, while slightly increasing the price target to $92 from $91. The revision comes in response to the recent announcement that Charter Communications (NASDAQ:CHTR) will be acquiring Liberty Broadband. The acquisition is expected to be finalized by or before June 30, 2027.
The analyst from Rosenblatt highlighted the rationale behind the downgrade, stating that the valuation of Liberty Broadband now aligns with their price target for Charter Communications. The new price target is based on the exchange ratio detailed in the acquisition agreement, which is set at 0.2360 shares of Charter for each share of Liberty Broadband.
The analyst further explained the components of the valuation, which include the equity value of GCI, a subsidiary of Liberty Broadband. GCI is anticipated to be spun out as part of the transaction. Rosenblatt's valuation of GCI is based on a multiple of 5 times its trailing twelve-month (TTM) Operating Income Before Depreciation and Amortization (OIBDA), amounting to an additional $5.35 per Liberty Broadband share.
The transaction between Charter and Liberty Broadband is anticipated to create significant value for shareholders. The exchange ratio and additional equity value from GCI have been integral in determining the revised price target for Liberty Broadband shares.
Investors and market watchers will be monitoring the progress of the acquisition closely, as the deal is expected to have an impact on Liberty Broadband's stock performance leading up to the targeted completion date. The slight price target increase to $92 reflects the analyst's updated assessment of the stock's fair value in light of these recent developments.
In other recent news, Liberty Broadband discussed its Q3 results and potential all-stock transaction with Charter Communications. The company's focus on future growth and market opportunities was a significant highlight, along with its robust financial standing. The investment in Charter is valued at $18.6 billion, and Liberty Broadband's cash and equivalents total $168 million.
Charter Communications, despite a net loss of 110,000 broadband customers, reported a 1.6% revenue growth, a 3.6% increase in adjusted EBITDA, and a significant 48% rise in free cash flow to $1.6 billion. Meanwhile, GCI, a subsidiary of Liberty Broadband, saw a revenue increase primarily due to data services.
The company's ongoing negotiations with Charter are expected to culminate around mid-2027, influenced by regulatory processes and Liberty Broadband's need to deleverage. The Annual Investor Meeting is scheduled to provide further insights into Liberty Broadband's strategic direction and the progress of its discussions with Charter.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Liberty Broadband's financial position and market performance. The company's market capitalization stands at $13.24 billion, with a P/E ratio of 16.93. This relatively low P/E ratio, combined with the company's profitability over the last twelve months, aligns with one of the InvestingPro Tips suggesting that LBRDK is trading at a low P/E ratio relative to its near-term earnings growth.
Liberty Broadband has demonstrated strong market performance, with a 48.64% price return over the last three months and a 72.7% return over the past six months. This robust performance is reflected in another InvestingPro Tip, which highlights the company's strong return over the last three months.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Liberty Broadband, providing a deeper understanding of the company's financial health and market position. These insights could be particularly valuable as the market anticipates the completion of the Charter Communications acquisition.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.