On Jul 10, 2014, we issued an updated research report on
Liberty Global plc
Except for one quarter, Liberty Global has delivered negative
earnings surprises in three quarters last year, with an average
beat of negative 84.96%. The company reported first-quarter 2014
financial results, wherein both its top and bottom line missed the
Zacks Consensus Estimate.
We believe that the long-term business fundamentals of the company
are very intriguing, primarily owing to strong demand for its
digital cable-TV services, faster broadband and triple-play bundled
offerings, strong cash flow and growing popularity of Horizon TV
services. Based on these positives, the company posted narrower
video subscriber loss in the reported quarter.
In the coming years, we expect Liberty Global's revenues to benefit
from a 'triple play' of video, broadband, and telephone offering,
as it has signed up more number of bundled customers in Europe and
Liberty Global also joined RDK Management LLC., a joint venture
between U.S. cable giants
Time Warner Cable
). RDK Management sets standards and development procedures for
Comcast's Reference Design Kit (RDK) for all-IP and hybrid IP/QAM
set-top boxes and gateways. Liberty Global's inclusion in the
consortium is likely to extend RDK's reach into several European
In Jun 2013, Liberty Global recently completed the full acquisition
of the British cable MSO, Virgin Media. The takeover places Liberty
Global as one of the leading cable TV MSO (multi service operator)
in the world. Additionally, the board of Liberty Global has decided
to authorize a $4.5 billion share buy-back program for the next two
However, stiff competition, saturated European markets, high
integration risks and mounting programming expenses may act as
headwinds for Liberty Global while moving ahead. Moreover, Liberty
Global's plan to continue with its buyback plan coupled with debt
maturity of around $12 billion by 2019 will severely hurt the
company's cash position.
Liberty Global is currently trading at significantly higher
multiples with respect to several valuation metrics compared with
the industry average and the S&P 500. We believe that this high
level of valuation may restrict above-market gain anytime soon.
Liberty Global currently has a Zacks Rank #4 (Sell). Another stock
worth considering in the Cable TV industry is
Cablevision Systems Corporation
) with a Zacks Rank #2 (Buy).
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