×
You will be redirected back to your article in seconds

Analysts: Cable stock fears are overblown

Group finds deterioration in revs per subscriber unlikely

Cable stocks are getting a bum rap on Wall Street, Prudential Equity Group said Tuesday.

Leading cable stocks Comcast, Cox and Cablevision have seen their shares fall by nearly 20% this year, as investors got spooked that deal-hungry cable ops might pursue profit-dampening acquisitions just as they were starting to generate substantial free cash flow. They also fear an impending price war with telcos for high-speed Internet services.

Both fears are overstated, according to Prudential Equity Group.

Based on the current stock prices, the market is expecting a drastic deterioration in revenue per subscriber that seems unlikely to occur, Pru concluded Tuesday.

In fact, to justify Comcast’s current share price, Pru reckons average revenue per customer would have to fall nearly 60% over the next 10 years.

And when market giant Comcast announces its second-quarter financial results this morning, firm is expected to announce plans to increase its current $2 billion stock buyback plans in a bid to boost the value of its shares. Company’s recent asset-share swap with Liberty Media will give it an extra $545 million in cash that could be used to buy back stock.

A $2.5 billion buyback is equal to around 4% of its share base. But analysts reckon Comcast could ultimately afford to buy back as much as 15% of its outstanding stock.

In a note Tuesday, bank reiterated its confidence in the sector overall and upgraded Comcast in particular to “overweight” from neutral.

Bank said that while investors were right to weigh concerns that cablers might pursue acquisitions or the prospect of rising interest rates, the current climate overstates the threat from satellite or a high-speed Internet price war with the telcos.

Telcos SBC, Verizon and Bell South have all discussed plans to roll out their own video services via fiber or as part of an alliance with EchoStar and/or DirecTV. But Prudential said these alliances did not pose an effective substitute to cable’s integrated triple-play.

Even predictions that cable companies might drastically — and unnecessarily — slash prices may be premature, pundits say. Cablevision recently offered up a $90 package of video, voice and telephony, but for a very restricted promotion.

With interest rates expected to rise next year (which raises the financial return required by public equities), Pru nevertheless reduced its price target on Comcast from $43 to $39. Prudential maintained its “underweight” rating on Cablevision, however, noting concerns about management’s ability to pull off the Rainbow DBS spinoff.

Comcast shares closed up 2.2% Tuesday at $28.74. Cablevision shares were up 1.3% to $18.29.

More TV

  • Front row: CBS THIS MORNING co-hosts

    CBS Hurls New Anchor Team Into TV's Morning-News Wars

    News Team: Assemble. CBS News plans to hurl a new anchor squad into TV’s morning-news wars Monday when a different trio – Gayle King, Anthony Mason and Tony Dokoupil –  takes the helm at “CBS This Morning.” The A.M. effort that has won critical plaudits by focusing on harder news topics, like international affairs and [...]

  • Dutch FilmWorks Moves into International Sales

    Dutch Film Works Moves into International Sales (EXCLUSIVE)

    A major new international sales outfit is coming to market. Dutch Film Works (DFW), one of the largest movie distributors in the Benelux region, is moving into film and TV sales. DFW general manager Angela Pruijssers will spearhead the sales effort alongside Charlotte Henskens, who will join from Amsterdam-based Fortissimo Films, where she is director [...]

  • 'Game of Thrones' Series Finale Details

    'Game of Thrones' Series Finale Details Reportedly Leak Online

    Who will survive the finale of “Game of Thrones”? Some savvy watchers of the HBO series might have a clue heading into Sunday night’s episode after a detailed description of the final installment reportedly leaked online. [Note: This post does not contain any “Game of Thrones” spoilers.] A spokesperson said HBO had no comment. While [...]

  • ‘Hitsville: The Making of Motown’ Acquired

    ‘Hitsville: The Making of Motown’ Acquired by Showtime for U.S.

    Polygram Entertainment, Universal Music Group’s film and television division, along with Capitol Music Group, Motown Records and Fulwell 73 announced today that “Hitville: The Making of Motown” has been acquired by Showtime for release in North America with plans for a fall premiere, and Altitude for theatrical release in the UK and Ireland. The feature-length [...]

  • Game of Thrones Cast

    What's Next for 'Game of Thrones'' Cast Members

    Eight years and eight seasons later, the “Game of Thrones” cast finally has some downtime to relax or move onto other projects. Some stars, like Kit Harington, who told Variety that he doesn’t plan on taking another role as physically demanding as Jon Snow, certainly deserve a break, but others have wasted no time getting back on [...]

  • 'Fleabag' Season 2 Review: How Its

    'Fleabag': Season 2’s Top 10 Breaks From Reality, Ranked (Column)

    The searing first season of “Fleabag” felt like a complete story in and of itself. As adapted from Phoebe Waller-Bridge’s one-woman show, the series expanded on the world of a woman wild with lust and grief with such expert ease that by the time it ended, even Waller-Bridge herself was sure that it was the [...]

More From Our Brands

Access exclusive content