America Movil Is Undervalued

Posted Dec 23rd 2009 4:20PM by Joseph Lazzaro
Filed under: Stocks to Buy

America Movil SAB de CV (AMX), the leading wireless provider in Latin America, continues to capitalize on its prospects for new business in the region, which is a major reason I'm reiterating my buy rating for the company's shares, first recommended on June 24, 2009, at a price of $36.47. If you bought AMX in June, you're up about 30%.

Look for 14-16% revenue growth in 2009 with AMX, followed by 10-12% revenue growth in 2010, led by improving performance in two, key markets: Brazil and Mexico. Subscriber growth should remain in the strong 9-11% range in 2010.

AMX also has a presence in 17 other countries in the Americas, and should have about 200 million subscribers by the end of 2009, up from 183 million at the end of 2008. Columbia and Peru appear to be the best new markets for AMX heading into the next decade. The First Call FY2009/FY2010 EPS estimates for AMX are $3.40 to $3.89.

Technically, America Movil's stock has tested psychological resistance at $50, and there has been some year-end profit taking by institutional investors, due to the fact that AMX trade near $26 in April. Normally, a pull-back from the key $50 level would warrant a pause, but not for this promising, emerging markets wireless play. Given the region's growth potential, in my analysis AMX is headed north, and soon.

Stock Analysis: America Movil SAB de CV is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in AMX now; then buy another 25% in one month, if Latin American economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your AMX position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $17.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: America Movil SAB, AMX