Index removals put Liberty Broadband back on investors' radar

Liberty Broadband (LBRD.K) was recently removed from several Russell growth and small cap benchmarks, a technical reshuffle that likely drove short term trading as index funds and passive investors adjusted their holdings.

This kind of index change does not alter Liberty Broadband’s core business of US communications and broadband services. However, it can affect who holds the stock and how its trading volumes behave around the rebalancing date.

At a share price of $31.33, Liberty Broadband has seen a 7 day share price return of 6.56% following the index removal news. However, its 90 day share price return is down 37.71% and the 1 year total shareholder return is down 65.98%, pointing to short term momentum against a much weaker longer term record and a shift in how investors are pricing its risks and prospects.

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With Liberty Broadband trading at $31.33 against an analyst price target of $48.50 and a 1 year total return that has fallen 65.98%, is the stock on sale, or is the market already discounting future growth?

Most popular narrative: 59.3% undervalued

At $31.33, the most widely followed narrative on Liberty Broadband pegs fair value at $77.00 per share, implying a large gap between current pricing and that assessment based on long term assumptions about earnings, margins and required return.

The analysts have a consensus price target of $99.0 for Liberty Broadband 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 $115.0, and the most bearish reporting a price target of just $83.0.

Curious what justifies a fair value more than double the current share price? The narrative leans heavily on future earnings power, margin resilience and a richer profit multiple than the sector currently enjoys. Want to see how those moving parts fit together into that $77.00 figure?

Result: Fair Value of $77 (UNDERVALUED)

However, there are still clear swing factors around Liberty Broadband, including its heavy reliance on Charter Communications and the execution risk tied to the planned GCI spin off and acquisition.

Next Steps

Given the mix of concern and optimism around Liberty Broadband, this is a good time to move quickly and review the full risk reward picture for yourself with 1 key reward and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.