Market Overview

Raymond James Flips The Channel On Cable One, Downgrades To Neutral

Raymond James Flips The Channel On Cable One, Downgrades To Neutral

Cable One Inc (NYSE: CABO) has put on a show this year, trading up 27 percent year-to-date and 45 percent off its annual low. But the spectacle may soon be cut short.

The Rating

Raymond James analysts Frank Louthan IV and Vincent Celentano downgraded Cable One from Outperform to Market Perform.

The Thesis

Cable One trades at 19.8 times Raymond James’ 2019 free cash flow estimate and 11.5 times the earnings before interest, tax, depreciation and amortization estimate. By both standards, it stands at a premium to peers, the analysts said. 

“While we believe it should receive a premium with lower leverage and stronger FCF growth, its premium appears fair and the factors that could change that seem harder to achieve from this point,” Louthan IV and Celentano said. 

Although bullish on Cable One’s fundamentals, the analysts don’t expect the level of revenue growth that merits additional upside to the stock.

“While we are confident in the company’s fundamentals as it is well positioned vs. peers, we believe most of the upside has been realized, trading at over a 2x premium to the cable group’s 2019 EBITDA estimates,” they said. 

Nonetheless, Raymond James considers Cable One’s broadband product underpenetrated and poised for subscriber growth.

“Cable One has been effective in using usage-based tiers which likely drives many customers taking the higher tiers more for the expanded data bucket than the actual speed. We believe Cable One has also been benefiting more from rate rather than unit growth, and see opportunity for further rate improvement at higher speed, with the bigger long-term opportunity coming from growing HSD subs.”

Price Action

Cable One shares were down 1.37 percent at $881.20 at the time of publication Wednesday. 

Related Links:

M&A Is Cable One's Most Important Catalyst, B Riley FBR Says In Bullish Initiation

No Cord Cutting: KeyBanc Prefers Cable Over Wireless In Broadband Picks

Latest Ratings for CABO

Sep 2019MaintainsOverweight
Aug 2019MaintainsBuy
Jun 2019Initiates Coverage OnEqual-Weight

View More Analyst Ratings for CABO
View the Latest Analyst Ratings

Posted-In: Frank Louthan IV Vincent CelentanoAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


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