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AMX- waiting for the final drop to 9sh
America Movil is the largest telecom carrier in Latin America. Its main markets are Mexico and Brazil. It also operates in USA under under the Tracfone and Straight Talk brands.
There is no doubt a rally that topped at 33.74 in Oct 2017 had an impulsive structure.
What draws my attention to that chart is what happened after it topped.
In particular I liked a clean (A)-(B)-(C) down corrective structure.
That chart illustrates really well what I keep telling you: in many larger (A)-(B)-(C) corrective structures wave (A) down comes as a strong drop followed by a strong and quick rally in opposite direction in wave ( B ) up. Let’s check the time that rally took. It started at 1.57 in Aug 2002. And it topped at 33.74 in Oct 2007. The rally lasted for 5 years!!!! The first move down in wave ( A ) down lasted for 1 year and it wiped out 2/3 of the rally! But look what happened next. AMX rallied hard again and retraced 76.4% of the drop in 2 years. What makes this chart an attractive long setup is a clean five wave down structure of the final wave ( C ) down.
Here AMX has drawn a bull trap, a deceptive triple bottom pattern. It is trying to play a bounce off 11.24 low made in 2008.
But I think the stock will dive again in the final exhaustion drop targeting a nice confluence of several targets:
– 76.4% retracement of the 2002 – 2007 rally = 9.25; and
– C of 5 = 109.2% of A of 5 = 9.31.
AMX - weekly chart updated on 4-19-2020
Financial Strength
The company had strong fundamentals. It had a manageable debt load of Debt to EBITDA at 2.35.
It was profitable ( Net Margin was 6.7% ) and showed good efficiency in re-investing profit (Return on Capital was 27%).
And it had an inexpensive valuation with EV to EBITDA at 4.7.
it is obvious that all the metrics will get worse in coming quarters because of COVID-19 pandemic. I expect the Latin American economy will get hurt by that pandemic. But people will continue talk over the phone and use Internet more than ever before. The company dominates the communication market in Mexico and controls significant share of the market in Brazil. I think one more push lower would create an attractive long opportunity.
Operating Margin
15.7
Net
Margin
6.7
Return on Capital
27
Price-to-Free-Cash-Flow
Debt-to-Ebitda
2.35
Dividend Yield
3.3
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