Finding Telecom and Media Value Beyond the Border
As telecom and media valuations in the U.S. move sharply higher, Mexican firms Grupo Televisa and America Movil trade at a discount.
Michael Hodel: Telecom and media valuations in the U.S. have moved sharply higher over the past year, leaving few opportunities, in our view. As an example, AT&T and Disney, our best ideas in the sector in 2019, have both run past our fair value estimates. As a result, we recently turned our attention south of the border, as we believe two Mexican firms provide reasonably attractive valuations. Wide-moat-rated Grupo Televisa trades at a nearly 30% discount to our fair value estimate, while narrow-moat America Movil trades at a nearly 20% discount.
The Mexican telecom industry still offers strong growth opportunities. Broadband penetration and DSL market share in Mexico both remain years behind the U.S. market despite increased coverage from both fiber optic and cable firms. We expect that broadband penetration will continue to increase as the Internet plays an increasingly important role in everyday life and more Mexican consumers gain exposure and access.
Michael Hodel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.