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American Movil (AMX) Displays Bright Prospects, Risks Remain

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On Oct 1, we issued an updated research report on America Movil, S.A.B. de C.V. (AMX - Free Report) .

In the past year, this Zacks Rank #3 (Hold) stock has lost 8.1%, narrower than the industry’s decline of 9.9%.

Existing Scenario

American Movil’s strength across its end markets along with its innovative products and offerings augurs well for the quarters ahead. The company continues investing in networks to increase coverage and implement new technologies to optimize network capabilities. Also, it remains focused on its cost-cutting program, particularly in Latin America, which is expected to reduce total costs and expenses.

Notably, the company added 1.1 million postpaid wireless subscribers in second-quarter 2018, including 537,000 in Brazil and 184,000 in Mexico and 103,000 in Colombia. In the fixed-line platform, broadband accesses improved 5% year over year as the company gained 275,000 fixed broadband clients in the quarter, most of them in Brazil and Central America. With a steady increase in subscriber base, American Movil has strengthened its position in core markets.

Moreover, the company has successfully launched 4.5G networks in Brazil, Mexico, Austria and Dominicana that can deliver speed up to 10 times faster than on 4G to enable subscribers experiment voice and video in high definition. This new platform will enable it to connect millions of devices simultaneously using Narrowband-IoT and Cat-M technologies to expand the universe of the IoT.

However, the company is striving hard to increase its smartphone sales figures through promotional discounts and subsidized offers, which contract margins and affect overall profitability.

Further, American Movil’s Brazilian operation (Claro) is being challenged by increased competition. Strict switching policy has also led to massive customer churn in Central America, Peru and Ecuador, and is a near-term concern for it.

Stocks to Consider

Some better-ranked stocks in the same space are Fortinet, Inc. (FTNT - Free Report) , Nuance Communications, Inc. (NUAN - Free Report) and Plantronics, Inc. (PLT - Free Report) . While Fortinet sports a Zacks Rank #1 (Strong Buy), Nuance Communications and Plantronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortinet surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 21.68%.

Nuance Communications outpaced estimates twice in the preceding four quarters with an average earnings surprise of 10.57%.

Plantronics exceeded estimates in each of the trailing four quarters with an average earnings surprise of 21.09%.

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