NEW YORK ( TheStreet) - Liberty Global, the international telecom operator run by John Malone, is poised to outperform its peers as it accelerates expansion plans, boosting revenue, says Macquarie, in its initial coverage of the company.
Liberty Global's success has been attributed to extensive share buybacks and acquisitions, said the analysts, led by Amy Yong. Macquarie set a 12-month price target of $90 after the analysts said free cash flow per share can be expected to reach $7.50 with a compound annual growth rate at 14% over 3 years. Macquarie forecasts sales to increase 5% to $18.9 billion for 2014.
Liberty Global and its holdings operate in 12 nations across Europe, Puerto Rico, and the United States. Earlier this month, the Denver-based company entered the U.K. market through its merger with Virgin Media (VMED) that has been valued at about $24 billion. Liberty has also increased its stake to 15% of Ziggo, the Netherland's largest cable-television provider.If history is any guide, Malone is likely to expand Liberty Global further, adding to the company's position in Ziggo as well as in Belgian Telenet, Macquarie said. At the same time, they may divest their stakes in Chellomedia, VTR, and Liberty Puerto Rico; the three companies together are valued at about $5 billion. The company is expected to begin offering Horizon TV to customers in Germany, expand their wireless services and, some speculate acquire more holdings in the United States adding to other liberty entities like Liberty Media and Liberty Ventures. Recently, Liberty Global has been engaged in a bidding war with UK-based Vodafone (VOD)Vodafone over Germany's biggest telecom company Kabel Deutschland (KD8). Liberty currently owns the growing Unitymedia-KBW which also operates in Germany. However, Monday Vodafone won out, buying KD8 for 7.7 billion Euros, or $10 billion. Surprisingly, Macquarie analysts have called Liberty "an interesting acquisition candidate for Vodafone following its bid for KD8," saying "it should also provide downside protection on the shares." Such a deal would continue the telecom provider's trend toward consolidation to off put industry costs.