Liberty Media Corporation (LMCA) Surges on Analyst Upgrade
Shares of Douglas County, Colorado, based Liberty Media Corporation (LMCA) rose on Tuesday, against the backdrop of a strong sell-off in stocks overall. Liberty Media's stock was up 15.81%, rising $3.80 per share, to close at $27.83, on volume of 3,882,000 shares. The stock was upgraded by analysts at Citigroup, as a result of it's announcement of the acquisition of the Formula One racing series last week.
On Tuesday, analysts Jason Bazinet and Michael Cohen of Citigroup's Citi Equity Research upgraded Liberty Media from "neutral" to "buy", raising the stock's target price from $22 to $32, an increase of $10 per share. Investors naturally reacted positively to the upgrade, pushing the stock price to nearly $28 by the close of the trading day. The trading volume of more than 3.8 million shares was ten times the normal trading volume for the stock.
The analysts took a favorable view of Liberty Media's announcement last week that it would acquire Formula One, calling the move "transformative". Liberty Media is acquiring the company, which has an estimated valuation of as much $12 billion, for just $8 billion.
In addition to the Citigroup upgrade, Pivotal Research initiated coverage of the stock on Tuesday, and gave it a "buy" rating, with a stock price target of $35 per share.
According to the Citigroup analysts, "A few years ago, press reports suggested an F1 (Formula One) IPO would value the firm at $12 billion EV (estimated valuation). At $12 billion EV, we previously described Formula One as a ‘trophy asset.' But, Liberty acquired the asset for just ~$8 billion EV. We suspect lower valuation based on erosion in F1's financial performance due to more F1 revenues flowing to the racing teams (versus F1 equity holders). But, the lower price tag reflects these new economics."
"We are excited to become part of Formula One," said Liberty Media President and Chief Executive Officer, Greg Maffei. "We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One and benefit fans, teams and our shareholders. We look forward to working closely with Chase Carey and Bernie Ecclestone to support the next phase of growth for this hugely popular global sport."
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