Streaming Expansion And Broadband Penetration Will Support Long-Term Earnings Recovery

Catalysts

About Grupo Televisa

Grupo Televisa is a leading Mexican media and telecommunications company with operations spanning cable, satellite, and Spanish language content production and distribution.

What are the underlying business or industry changes driving this perspective?

• Continued migration of audiences and advertisers toward Spanish language streaming, with ViX gaining scale across free and premium tiers, should support sustained growth in subscription and licensing revenue and higher advertising yields. This may lift consolidated revenue and EBITDA.
• Ongoing integration of Izzi and Sky together with OpEx efficiency programs in both cable and TelevisaUnivision are structurally lowering cost bases. This can translate modest top line growth into outsized expansion in operating margins and earnings.
• Disciplined capital allocation, including a CapEx to sales ratio kept below 20 percent and supplier renegotiations, is increasing free cash flow conversion. This enables faster deleveraging and potentially higher equity value through improved net income and reduced interest expense.
• Growing broadband penetration and data consumption in Mexico, combined with Televisa’s focus on higher value customers and convergent bundles that include MVNO mobile, should underpin ARPU expansion and a healthier revenue mix. This may support net margin resilience as volume growth normalizes.
• Strengthening balance sheets at both Grupo Televisa and TelevisaUnivision, driven by refinancing longer maturities and consistent free cash flow generation, reduce financial risk and create optionality for future content investment or shareholder returns. This supports medium term earnings stability.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Grupo Televisa's revenue will decrease by 2.3% annually over the next 3 years.
• Analysts are not forecasting that Grupo Televisa will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Grupo Televisa's profit margin will increase from -18.5% to the average US Media industry of 10.5% in 3 years.
• If Grupo Televisa's profit margin were to converge on the industry average, you could expect earnings to reach MX$5.8 billion (and earnings per share of MX$2.25) by about December 2028, up from MX$-11.0 billion today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 15.0x on those 2028 earnings, up from -2.4x today. This future PE is lower than the current PE for the US Media industry at 17.4x.
• Analysts expect the number of shares outstanding to decline by 1.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.43%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Broadband penetration in Mexico is moving toward saturation and management itself expects diminishing net additions across all players, which may cap long term growth from new subscribers and limit the ability to offset competitive price pressure, constraining revenue growth and eventually weighing on earnings.
• Sky is acknowledged internally as a structurally declining business that will keep losing subscribers as fiber and OTT penetration increase, and although it currently generates positive cash flow, its ongoing volume erosion and negative optics on consolidated sales could drag down total revenue and compress operating margins over time.
• TelevisaUnivision still carries relatively high leverage at 5.5 times EBITDA and relies heavily on refinancing and cost cutting to sustain margins, so a shift in credit markets, weaker advertising cycles or slower ViX growth could jeopardize deleveraging plans, increase interest costs and pressure net income.
• Industry wide shifts from linear TV to streaming are already driving declines in U.S. advertising revenue and only partially offset by ViX growth, and if linear deterioration accelerates faster than digital monetization or MAU growth, overall advertising income and EBITDA expansion could fall short of expectations.
• Management’s strategy to prioritize higher end customers over volume in a market that may soon be fully penetrated assumes continued ARPU increases and rational pricing among competitors, but aggressive discounting by rivals like Telmex or macroeconomic strain on consumer wallets could undermine pricing power, limiting ARPU gains and putting pressure on revenue and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of MX$19.3 for Grupo Televisa 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 MX$55.0, and the most bearish reporting a price target of just MX$9.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be MX$55.5 billion, earnings will come to MX$5.8 billion, and it would be trading on a PE ratio of 15.0x, assuming you use a discount rate of 20.4%.
  
• Given the current share price of MX$9.97, the analyst price target of MX$19.3 is 48.3% higher.
  
• 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.