Our $20.0/ADR target price is based on a 5-year DCF, discounted at a 10.4% WACC. Perpetuity implies an exit EV/EBITDA of 5.2x, in line with 5.4x 5-year average and 5.2x 10-year average. The model assumes a capital structure of 70% equity and 30% debt in the LT. We assume 2.0% perpetuity growth.

Downside risks to achieving our target price: Besides the historical macro volatility in the region, weak exchange rates would pressure reported growth (two-thirds of revenues come from outside Mexico and in currencies other than AMX's reporting currency, the Mexican peso) and earnings potential (due to AMX's un-hedged portion of US$-denominated debt). Competition and regulation are potential sources of continued pressures on operations. Lastly, if the Mexican economy weakens and political uncertainty increases, Mexican stocks' cost of capital could increase and trigger a decline in AMX shares.

Upside risks to achieving our target price: Re-acceleration of top-line growth and margin expansion; stronger LatAm currencies. In addition, AMX might finally receive its long-awaited pay-TV license, which would give exposure to the fast-growing market in Mexico. Moreover, a more constructive outlook on local regulation could push the shares higher. Last but not least, improved visibility and confidence on Mexico's macroeconomic outlook could bring cost of capital lower and AMX's shares higher.