Wells Fargo Initiates Coverage on Clear Channel Outdoor (CCO); Fundamentally Undervalued, But Upside Potential is Limited

September 15, 2009 4:56 PM EDT
Get Alerts CCO Hot Sheet
Price: $1.17 -5.65%

Rating Summary:
    4 Buy, 5 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 12 | Down: 18 | New: 23
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Wells Fargo initiates coverage on Clear Channel Outdoor Holdings (NYSE: CCO) with a Market Perform rating.

Wells analyst says, "While we believe that CCO shares are fundamentally undervalued, as both our DCF analysis and our multiples-based approach suggest a fair price of $9.00, the conflicts of interest with parent company CC Media Holdings (CCMH) and its potential bankruptcy create significant uncertainty, which limits near-term upside potential, in our view. Our two biggest concerns in the event CCMH files for Chapter 11 are that (1) CCO stands to lose $488 million in cash (roughly $1.40 per share, which we deduct from our $9.00 fundamental price to determine our $7-8 valuation range) "borrowed" by CCMH via its cash management agreement, and (2) 99% of the voting interest in CCO would transfer to new owners that may or may not act in the interest of CCO equity holders. Yet even if a CCMH bankruptcy does not materialize, uncertainty still surrounds the intercompany loan and the cash management agreement, which mature in August 2010."

To see more analyst ratings on CCO Click Here.

Clear Channel Outdoor Holdings, Inc., an outdoor advertising company, owns and operates advertising display faces worldwide.

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