Liberty Global, Big in Broadband

In today’s increasingly wired world, I like to keep an eye on those in the business of systems for delivering content. Traditional phone and traditional television are old school, and many think the wave of the future is internet video and internet phone (aka Voice over internet protocol or VoIP. For those of you not familiar with this, it basically means your voice is sent over broadband internet instead of traditional phone lines). Liberty Global (LBTYA) is a holding company that owns interests in many broadband distribution services and video programming services.

Its offerings include advanced video, voice, and Internet-access services, which reach 13 million customers in 17 countries principally located in Latin America, Europe (interestingly, excluding France), Japan, and Australia. It owns the largest cable operator in Europe and Japan.

August was a busy month for Liberty. Early in the month, it reported a 46% increase in second-quarter revenue to $1.59 billion, a result of adding new subscribers to its television, telephone and high-speed Internet services. It also reported that quarterly operating cash flow increased 54%.

At the same time, it reported a loss from continuing operations of 40 cents a share in part due to increased operating expenses. It lowered its guidance targets, from 6.8 billion to 6.2 billion, to reflect mergers and acquisitions activities (like agreeing to buy a second cable operator in the Czech Republic) and announced a $1 billion plan to buy back shares to try to kick up its share price, which has dipped to as low at $18.21 this year. The buyback announcement seems to have worked: share price has been climbing pretty steadily since.

With more and more people turning to the Internet, and away from traditional TV, for content --and also driving their own content through You Tube and Google video -- cable guys like Liberty Global are pushing to remain relevant and on top of their industry. Europe's biggest cable operator [UPC], owned by Liberty Global, has just announced that it will bring out a show that mixes traditional broadcasting with user-generated content. Nobody is certain how content will be delivered in the future, so this field is always risky, but Liberty Global is big, it has got its tentacles into many diverse and stable markets. I don’t think it is going anywhere soon.

Type of stock: Liberty is big and diverse and as low risk as a speculative growth media stock can be.

Price target: Now in the $25 range, the stock has been on a rebound since hitting a low of $18.21 earlier this year. I think the value in this price is almost squeezed out. If you see it take another dip down to the lower $20s, pick it up for the portfolio. I expect it to hit near $30 by year’s end.

LBTYA 1-yr Chart

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