Waiputv Expansion And Long-term Contracts Will Strengthen Market Position

Key Takeaways

• Long-term contracts and strong marketing enhance revenue stability, improve net margins, and boost brand recognition and market share.
  
• Integration of personalized shopping and waipu.tv's growth increase sales efficiency, EBITDA, and cash flow, while cost discipline improves financial resilience.
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Catalysts

Provides telecommunications, broadcasting, and multimedia services for mobile communications/mobile internet, and digital lifestyle sectors in Germany.

• The signing of long-term contracts with network operators like Telefonica Deutsch­land gives freenet increased planning security and the ability to optimize campaigns, which is expected to stabilize and potentially enhance its revenue and net margins over the long term.
  
• Marketing efforts, particularly in sports sponsorships and promotions under the freenet brand, have increased brand recognition and customer preference, potentially driving higher revenue and improving net margins due to increased market share.
  
• The successful integration of assisted personalized shopping across both online and offline channels enables quicker response to market changes, which could boost revenue through increased sales efficiency and reduced dependence on third parties.
  
• The growth and price increase in waipu.tv coupled with focus on positive EBITDA contribution from EXARING/waipu.tv is expected to significantly enhance EBITDA and free cash flow margins, addressing investor doubts regarding its profitability.
  
• Emphasis on cost discipline, including initiatives like restructuring programs at Media Broadcast, aim to control overhead and enhance net margins, which could improve overall earnings and financial resilience in a competitive market.

freenet Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming freenet's revenue will grow by 1.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.9% today to 12.3% in 3 years time.
• Analysts expect earnings to reach €324.5 million (and earnings per share of €2.94) by about April 2028, up from €297.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.9x on those 2028 earnings, up from 13.0x today. This future PE is greater than the current PE for the GB Wireless Telecom industry at 12.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.55%, as per the Simply Wall St company report.

freenet Future Earnings Per Share Growth

Risks

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Valuation

• The analysts have a consensus price target of €33.546 for freenet based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €39.8, and the most bearish reporting a price target of just €28.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.6 billion, earnings will come to €324.5 million, and it would be trading on a PE ratio of 13.9x, assuming you use a discount rate of 4.6%.
• Given the current share price of €32.6, the analyst price target of €33.55 is 2.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.