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Millicom's Strategic Share Repurchases: A Vote of Confidence in Its Future

AInvestMonday, Jan 6, 2025 9:39 am ET
2min read


Millicom International Cellular S.A. (NASDAQ: TIGO), a leading provider of fixed and mobile telecommunications services in Latin America, has been actively executing its share repurchase program. This strategic move aligns with the company's long-term growth strategy and demonstrates management's confidence in its valuation and future prospects. In this article, we will explore the significance of Millicom's share repurchases, their impact on earnings per share (EPS), shareholder value, and market sentiment, as well as the timing and size of these transactions.



Significance of Share Repurchases

Share repurchases, also known as buybacks, are a strategic tool used by companies to return capital to shareholders, signal confidence in the company's valuation, and potentially boost EPS and shareholder value. By repurchasing shares, companies reduce the number of outstanding shares, which can lead to an increase in EPS on a per-share basis. Additionally, share repurchases can support the stock price by reducing the float (the number of shares available for public trading) and signaling management's confidence in the company's future prospects.

Impact on EPS and Shareholder Value

Millicom's share repurchases have a positive impact on its EPS and shareholder value. As of January 3, 2025, the company has repurchased a total of 1,972,377 treasury shares, representing approximately 1.15% of its total outstanding shares. This reduction in the number of outstanding shares increases EPS on a per-share basis. Assuming Millicom's net income remains constant at $570 million, the EPS would increase from $0.33 to approximately $0.34.

Share repurchases can also positively impact shareholder value by reducing the float and potentially driving up the stock price. Although the size of Millicom's recent repurchases may not have a significant immediate impact on the stock price, the company's long-term commitment to buybacks could lead to a more substantial reduction in outstanding shares over time, supporting EPS growth and shareholder value.

Timing and Execution of Repurchases

Millicom's share repurchases have been executed strategically, taking advantage of favorable market conditions and positive investor sentiment. The company has repurchased shares in two separate programs, with the first executed between December 2, 2024, and December 6, 2024, and the second between December 30, 2024, and January 03, 2025. These repurchases were executed on Nasdaq Stockholm by Citigroup Global Markets Limited on behalf of Millicom, demonstrating a structured and measured approach to the buyback process.

Investor Sentiment and Market Conditions

The timing and execution of Millicom's share repurchases reflect a strategic approach to capital allocation and investor sentiment. The company's management believes in the long-term prospects of the company and is confident in its valuation. Share repurchases signal management's commitment to returning capital to shareholders and can positively influence market sentiment. The positive analyst recommendation (buy) and the number of analyst opinions (8) also indicate that investor sentiment towards Millicom is generally positive.

In conclusion, Millicom's share repurchases align with its long-term growth strategy by demonstrating a commitment to returning capital to shareholders, signaling confidence in the company's valuation, and potentially supporting EPS growth and shareholder value. The strategic timing and execution of these repurchases reflect a commitment to capital allocation and investor sentiment, with the company taking advantage of favorable market conditions and positive investor sentiment to repurchase shares. As Millicom continues to execute its share repurchase program, investors can expect to see a positive impact on the company's EPS and shareholder value.
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