Are Quebecor Inc. Shares Undervalued?

Analysts are calling shares of Quebecor Inc. (QBCRF.PK) undervalued on the heels of the company's second quarter results on Tuesday.

With the company's cable division outperforming its peers across operating and financial metrics as well as an aggressive bidding strategy to win as much wireless spectrum in Quebec as possible, investors can now look past Quebecor's spending as it creates value in the long-term, said UBS analyst Jeffrey Fan in a report to clients on Tuesday.

Mr. Fan said:

We believe that the wireless investment can create value in the long-term under the appropriate ARPU and cost assumptions and that the company has sufficient capacity to finance the investment.

Even if we ascribe no value to the wireless business and furthermore, take into account the cost of the spectrum license, the initially negative wireless EBITDA and cash flow impact, we believe the shares are still attractively valued.

Mr. Fan reiterated his "buy" rating on the company's stock and increases his price target from C$38 to C$41.

RBC Capital Markets analyst Drew McReynolds said in a report today that Quebecor's wireless strategy where bundling and convergence with media content will be key growth drivers holds promise.

Mr. Reynolds said:

We are optimistic at Videotron's wireless prospects and believe Videotron can take advantage of the brand, well developed distribution, and bundle the product within its Quebec territory while funding largely out of the cable business' rapidly growing free cash flow and credit lines.

He lowered his price target on the company's stock from C$42 to C$39.