Quick Pitch: Telefonica (NYSE: TEF) -- SHORT

By: SumZero Staff | Published: September 11, 2012 | Be the First to Comment


Source: Hedge Fund
Location: New York, NY

Company: Telefonica (NYSE: TEF)
Recommendation: Short
Recent Price: €12.90
Target Price: €10.00
Comps: Vodafone (NYSE: VOD), America Movil (NYSE: AMX)

Quick Pitch: Despite a 12% dividend, Telefonica equity is not a safe place to capture yield. It has issues in each of its major markets. In Spain, it is losing share in wireline and wireless and will need to increase its capex in both areas to stem the market share declines. In LatAm, Brazil's EBITDA growth was offsetting its declines in Spain. However, EBITDA has begun to fall in Brazil and will continue to do so due to the increased competitive intensity. Furthermore, the cash being generated in Venezuela cannot be repatriated due to government regulations. Finally, the company has €7 bn in debt maturities this year and €30 bn due in the next 4 years.

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