We are maintaining our Hold recommendation for Amer Movil (AMX), a leading provider of wireless service in Latin America.
The company's recent performance is highlighted by strong subscriber growth across key markets, including Mexico and Brazil, with gains in market share and ARPU [average revenue per unit] contributed by expanded 3G penetration throughout Latin America. However, intense competition, political risk in Mexico, investment risks associated with emerging markets and regulatory issues warrant conservatism in assigning a significantly higher valuation.
Additionally, recent concerns with regard to Latin American equity markets and associated inflationary conditions may limit AMX's valuation performance in the upcoming reporting periods. In our opinion, key drivers for the stock continue to be related to subscriber growth and increasing usage of service in Latin America as 3G wireless rollouts accelerate for the remainder of 2008.
The stock is currently trading at lower P/E multiple than previous quarters, but still at a premium to the forward P/E ratio and other comparable metrics for the peer group average. Strong earnings, improved EBITDA margins and continued solid subscriber growth may provide slightly improved valuations over the next several quarters. We set a six-month target price to $55.00, based on approximately 14.5 times our 2008 earnings estimate.
Anindya Barman contributed to the report.
Read the full analyst report on AMX
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