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Analyst Blog

On Jan 3, we maintained our Neutral recommendation on Liberty Global Inc. (LBTYA - Analyst Report). The company reported mixed financial results for the third quarter of 2013. The bottom line outpaced the Zacks Consensus Estimate but the top line missed the same.

Why the Reiteration?

Going ahead, we believe Liberty Global’s revenues will continue to benefit from a ‘triple play’ of video, broadband and telephone, as it signs up more “bundled” customers in Europe and Latin America.

To improve liquidity, Liberty Global agreed to sell its international content business, Chellomedia, to AMC Networks Inc. for nearly $1 billion. Liberty Global launched a hybrid IP video gateway called “Horizon TV” in almost five countries. The new web-based hybrid modem includes an open software developer platform and application store. Such value-added services will continue to drive subscriber growth for the company going forward.

Despite being the largest global pay-TV operator, its continuous acquisitions may led to integration risks and a highly leveraged balance sheet. The company predominantly operates in Europe, which at present is economically the most vulnerable. Ongoing debt crisis in several European countries may significantly affect the future prospect of Liberty Global.

Several European broadband service providers are gradually deploying high-speed DSL and Fiber-to-the-Home networks, making the industry extremely competitive. In addition, we expect more cash-strapped consumers to downsize existing services, resulting in churn in the subscriber base.

Meanwhile, the stock price has soared more than 41.9% over the last year and is currently trading at a 52-week high end.

Liberty Global currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other stocks to consider in the Business Software & Services industry are Comcast Corp. (CMCSA - Analyst Report), Liberty Media Corp. (LINTA - Analyst Report) and Verizon Communication Inc. (VZ - Analyst Report). All three carry a Zacks Rank #2 (Buy).

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