Opposing views

Grupo Televisa subject of Street debate

Should investors buy the New York Stock Exchange-listed shares of Mexican broadcast powerhouse Grupo Televisa, or should they hold their positions in the stock?

Two analysts published reports on the topic last week.

Early in the week, Credit Suisse analyst Andrew Campbell lowered his stock rating on Televisa from "outperform" to "neutral" and reduced his target price by $2 to $32.

"Televisa was already going to face difficult comparisons in the second quarter and third quarter, but recent softness in the Mexican ad market may exacerbate the problem," he wrote in a report.

Other negatives for Televisa shares include an under-leveraged balance sheet and the fact that a speedy resolution of its legal proceedings against Spanish-language media giant Univision Communications is unlikely, Campbell said.

The analyst went on to point out how the company's shares have changed little or are down slightly this year, adding, though, that "they are still up 50% over the past year."

He signaled there could be upside to the stock, but less than 20%.

Miller Tabak + Co. analyst David Joyce, meanwhile, made the bull case for Televisa last week.

Upgrading the broadcaster's U.S. depository shares from "neutral" to "buy," he also reiterated his $32 price target — the same as Campbell now has on Televisa's stock.

The analyst suggested that macro factors have pulled down the stock, even though the firm is well positioned.

"Global interest rates and emerging markets sentiment have been factors in pushing down the stock," Joyce argued, adding that another factor has been the rejection of several key points of a new media law by Mexico's highest court.

The analyst argued, though, that concern over the competitive ramifications of the pending legal changes "may be overblown."

He also suggested that the second quarter "will have the toughest comparisons of the year, primarily affecting the television broadcasting division, since last year Televisa had presidential election ad spending and the World Cup." But things should look up from there.

Joyce had previously told investors that Televisa shares offer an attractive entry point in the $27-$28 range, where they traded last week.

Overall, while there is still investor concern about criminal unrest in Mexico and incentives for increased competition for the firm, Joyce concluded: "We think Televisa is well-positioned to weather those latter forces."
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