Citi Downgrades Liberty Interactive (LINTA) to Sell

May 12, 2009 9:11 AM EDT

Citi downgrades Liberty Interactive (Nasdaq: LINTA) from Buy to Sell.

Citi analyst says, "We rate Liberty Interactive Sell/High Risk. While Liberty's results have held up well thus far in the economic downturn, the recent run up has level to valuation levels that we believe are unsustainable. This is especially true in light of our more bearish view on consumer spending...Liberty Interactive's stock price has almost doubled since the 4Q08 earnings release in late February. Digging into this a little more, the attributed equity investments have increased 57%, while the core stock price has increased 204%. To put this in perspective, competitor Home Shopping Network is up 115% over the same time period, about half the implied gain at the core of LINTA (i.e. QVC and the e-commerce companies).

"With our 2009 unlevered free cash flow estimate falling to $768 million from $815 million, we estimate the core Liberty Interactive business is now trading at a 9.6% unlevered free cash-to-EV yield. This is down from 11.9% at the time of the 4Q08 call, and is below our 10% target yield...This current valuation looks a bit rich to us and likely reflects a more bullish outlook on the economy."

Liberty Media Corporation is a holding company, which, through its subsidiaries is engaged in the video and on-line commerce, media, communications and entertainment industries.

To see more analyst ratings on LINTA Click Here.

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