CNSL - Consolidated Communications slips 7% as Citi cuts to Sell

Consolidated Communications (CNSL) is 7% lower after a downgrade to Sell at Citi, which is making the move largely on valuation. That comes after an 85% run up in the stock since March 1. And "we think the market may be missing two important issues," analyst Michael Rollins says. Consensus doesn't seem to be incorporating a "significant EBITDA headwind" from losing most of its high-margin CAF-II subsidies in 2022. And "second, the upcoming dilution from the Searchlight funding may not be fully contemplated by the market. Hence, on 2022 estimates, we believe the market is assessing CNSL's firm value at ~6.5x adjusted EBITDA versus our calculation of nearly 7.5x." So it splits the different and values core communications at 7x EBITDA, which brings it to a revised target price of $8. That implies a further 11% downside beyond today's decline. Street analysts are Bullish on CNSL, as are Seeking Alpha

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Consolidated Communications slips 7% as Citi cuts to Sell