Increasing Target Price on Expectations of a Strong Share Buyback
Increasing Target Price on Expectations of a Strong Share Buyback
We are updating our target price and valuation on Liberty Interactive. Our new target price of $21.00 (from $19.00) reflects
stronger expectations of share repurchases in 2H12 and 2013. Our new 2012 and 2013 EPS estimates reflect half of FCF
being used for share buybacks, in-line if not conservative given Liberty's historical penchant for buybacks. We believe that
while EBITDA growth over the next year will be sluggish given the recent domestic and international trends posted in the
most recent quarter, EPS growth will likely be far stronger reflecting a buyback of some 38mn shares by the end of 2013.
What's New: We are updating our estimates and valuation on Liberty Interactive.
Our new estimates incorporate a strong share buyback starting in 2H12 with all of
the split-off related blackout periods now behind us.
New Estimates: While our EBITDA estimates are largely unchanged, our EPS and
FCF/share estimates are increased as we believe that the company will convert
likely half of their FCF towards share repurchases. With capex in 2013 coming
down from elevated levels in 2012, even with flattish EBITDA, share repurchases
provide strong valuation support and hence our target price change.
New Target: We are raising our target price from $19.00 to $21.00 on a strong
share repurchase expectation. We remain Buy rated.