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April 07, 2009

NII Holdings Gets Downgrades

I was hoping for a stronger defense by the analyst community after NIHD fell 18% yesterday following pre-announcement of lower than expected 1Q09 subscriber growth. The stock caught two downgrades and one analyst who has a buy lowered his price target. Goldman reiterated the buy noting that the change was minimal relative to its own already conservative estimates. NIHD trades at less than 4 times EBITDA, even assuming EBITDA below current guidance. I am still not so sure the lower sub growth will translate to lower EBITDA as new subs cost money to acquire including handset subsidies. Furthermore, the Mexican Peso and Brazilian Real are both much stronger than when NIHD issued its guidance in late February. I remain torn over NIHD. Clearly challenges exists but the stock is awfully cheap esepcially considering that even at new lower sub growth forecast, subs will be up 18-20%. Can you find similar growth elsewhere?

Posted by Steve Birenberg at April 7, 2009 12:07 PM in NIHD