Telsey: Cable, Satellite TV Stocks Trading Below Early-2000s Valuation

In a report published Friday, Telsey Advisory Group analyst Tom Eagan discussed the Cable and Satellite segment, noting the group is trading more as a function of M&A activity than fundamentals. According to Eagan, stocks within the sector are trading in a range of 6.6x-8.6x 2015 EBITDA, or approximately an 8.0x average. This is "materially" below the 9.8x and 11x average multiple of 2003-2004 and 2000-2001, respectively, during earlier periods of sector consolidation.

Eagan singled out

as a name trading on M&A activity rather than fundamentals. Shares of Cablevision were downgraded to Market Perform from Outperform with an unchanged $23 price target. Eagan noted that shares of Cablevision gained 18 percent year-to-date due to the market's belief that the company could be a takeout candidate. In addition, shares rose 22 percent following the Altice announcement of its Suddenlik purchase. However, the analyst doesn't view the company as a takeover candidate as neither

nor

are interested in pursuing an acquisition. Eagan said that Cablevision has struggled to grow customers and its adjusted operating cash flow (AOCF) given a 50 percent overlap with

's Fios service. "We believe that the high-level household penetration of its existing service and the high-level Verizon Fios overlap caused Cablevision to focus more on growing AOCF than subscribers," Eagan wrote. "while management appears to be refocusing on its subscribers, the strategy has yet to be borne out." Nevertheless, the analyst assigned a takeout price of $27.60 for Cablevision but did repeat that a takeout is "unlikely."