Grupo Televisa SA de CV (TV) has been posting great operating results in recent years. New investments in the telecom sector and the gambling business are quite encouraging and should keep on growing in the following quarters. However, the economic crisis in the U.S. and Europe will affect not only the media company's international business, but also its Mexican operations in the very short term.
A considerable share of the company's income comes from its U.S. operations, including the sale of content, website and cable television. We believe TV is in a better position to face the economic crisis if compared to other Mexican companies, since it has a strong cash position. However, it will be hard to avoid the effects of the adverse scenario. We are changing our current recommendation on TV from Buy to Hold.
Currently, Grupo Televisa trades at 11.9x our 2008 earnings estimates, with a small premium to industry mean and median. We understand TV should trade around 12.5x our 2008 earnings estimates in the short-term, lower than the company's historical standards, but with a premium over the industry and the S&P due to TV's strong cash position. Accordingly, our target price is $18.25.
Read the full analyst report on TV
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