America Movil Downgraded At Macquarie, Brazil Upside Not Here For A While

• Shares of America Movil SAB de CV (ADR) AMX have declined 28.58 percent year to date, reaching a low of $16.01 on November 16.
• Kevin Smithen of Macquarie Research has downgraded the rating on the company from Outperform to Neutral, while lowering the price target from $20.00 to $18.50.
• Smithen mentioned that while a pickup in Brazil could take time, there did not appear to be any meaningful drivers for the stock in the next several quarters.

Analyst Kevin Smithen said that although the sentiment on Latin American stocks in general, and America Movil in particular, has been “terrible,” “absolute downside should be limited from here due to expected strong capital distributions to shareholders.”

Although the negative impact of regulatory reforms in Mexico on the company’s EBITDA has been “more benign than initial market expectations,” Smithen stated that America Movil’s ability to diversify its EBITDA into other Latin American markets, Europe and Brazil was overestimated.

The company’s expansion into Europe had initially been “part of a grander plan,” which included deals with other telecoms. “With those deals not happening, we feel that AMX could be shut out of larger-scale European M&A in the coming years,” according to the Macquarie report.

On the other hand, the company appears to be unwilling to sell its TracFone asset in the U.S., despite there being clear indications of prepaid to postpaid subscriber migration.

“We had hoped that AMX would have announced a breakup or significant asset sale at its recent analyst day but AMX’s Board appears content with shrinking the mkt. cap and riding out the storm in Brazil. This could result in sideways trading for several qtrs. unless LatAm investment sentiment or forex begin to improve,” the report added.