Morgan Stanley's Call Spurs Rally in America Movil to 2016 High

Updated on
  • Bank recommends buying shares on valuation, repurchase outlook
  • Stock rebounds from lowest valuation level since at least 2001

America Movil SAB, Latin America’s largest wireless carrier, climbed to the highest level this year after Morgan Stanley recommended buying the shares amid low valuations and prospects for stock repurchases.

Shares of billionaire Carlos Slim’s company advanced 2.6 percent to 12.08 pesos at the close of trading in Mexico City, leading gains in the nation’s IPC stock index. The mobile provider rebounded after its valuation dropped to the lowest level since at least 2001, according to data compiled by Bloomberg based on a measure of profitability.

America Movil posted the biggest plunge since 2008 last year after President Enrique Pena Nieto introduced laws in 2014, forcing it to reduce its market share below 50 percent or face antitrust penalties designed to curb profits. The company has also taken a hit from the economic crisis in Brazil, where it got 17 percent of its sales in the third quarter. Still, the carrier’s operating cash flow excluding expenses looks set to benefit from declining capital intensity after America Movil completed a five-year plan to expand its cable and fiber networks and to deploy 4G in mobile.

“The risk-reward now seems attractive with valuation metrics at multi-year lows,” Michel Morin, an analyst at Morgan Stanley in New York, wrote in a note to clients. Excess free cash flow “is typically returned to shareholders mostly via buybacks, which we project will accelerate,” he said.

Morgan Stanley also set a price estimate for the company’s American depositary receipts at $16, which would imply a 27 percent increase from Monday’s close.

— With assistance by Joshua Fineman, and Patricia Laya

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