Even After Friday's Selloff, Little Upside Seen In Liberty Lilac Shares

Morgan Stanley downgraded Liberty LiLAC Group LILA to Equal-Weight from Overweight on deteriorating trends at cable & wireless (CWC).

In addition, the brokerage admitted they were “wrong” on the multiple and cut its price target to $19 from $36 due to lower earnings, high leverage and by a lower target multiple. Further, Morgan Stanley sees limited upside to its price target despite more than 20 percent selloff on November 4.

The analyst has lowered its target multiple to 7.0x from 8.5x to reflect deteriorating revenue trends and lower than expected visibility at CWC segment.

“The lower EBITDA and higher capex that we now project has all but wiped out the FCF generation that we were previously projecting and that we viewed as a key driver of stock price performance in 2017-18,” analyst Michel Morin wrote in a note.

Morin would become constructive on the stock if the company shows improving revenue trends at CWC and/or sustainable free cash flow generation at the group level.

Liberty LiLAC, which consists of Liberty Global’s Latin America and Caribbean operations, also unveiled a $300 million stock repurchase program, which will commence immediately and runs until year-end 2019.

Shares of LiLAC closed Friday at $19.10.