Cable distribution stocks, battered by the fear that a prolonged pandemic would wreak havoc on their businesses, proved their resilience once again by clawing back from their low points in March to strong gains in Q2. And though some analysts expect the tide to rise in the second half of the year, they warn of a potential broadband pullback as people return to work could hurt the stocks in early 2021.

The four major cable distribution stocks — Comcast, Charter Communications, Cable One and Altice USA — all posted strong Q2 gains; Charter led the way with a nearly 17% gain in the period. The increase was a welcome change from the first quarter, when every stock in the sector hit new 52-week lows.

FBN Securities media analyst Robert Routh said COVID-19 helped cable on the broadband side because customers were working from home and, in some cases, their employers helped pay for higher-speed tiers. That could change once people start returning to offices.

“I don’t think you have to worry about it this year,” Routh said. “But after that, that’s what I’m worried about.”

A Case-by-Case View

MoffettNathanson principal and senior analyst Craig Moffett said investors are no longer looking at cable as an individual market sector. “There is no monolithic ‘cable sector’ anymore,” Moffett said. “Each company now has a different story to tell.”

For example, he noted Charter outperformed its peers in Q2 after showing better-than-expected video and broadband results, while vertically-integrated Comcast shares, despite a strong broadband showing, grew at a slower pace. Pure-play cable operators Altice USA (up 1.1%) and Cable One (up all year despite the pandemic), had varying results.

“Comcast has lagged Charter badly, not because its cable business isn’t as good, but because the rest of its portfolio is an albatross,” Moffett said. “Altice has struggled because it is so much more mature … making it harder to forecast long-term growth. And Cable One is just so inexplicably overvalued that it doesn’t really get discussed in the same conversation.”

Comcast, which still relies on cable distribution for most of its revenue (56% in Q1), was hit hard by declines at its NBCUniversal content unit. The rapidly eroding advertising market, declining pay TV subscriber rolls (which means less affiliate fee revenue for programmers) and the rise in streaming services have all helped batter the content sector. And though NBCU launched its own streaming offering (Peacock) in July to strong reviews, some analysts have called for Comcast to separate or spin off the content business to unlock greater value on the distribution side.

“A lot of investors I have talked to who own Comcast are upset because they think they would have done much better if there was some way to value the two separately,” Routh said.

Routh isn’t alone in that thinking. Sanford Bernstein media analyst Peter Supino wrote an open letter to Comcast chairman and CEO Brian Roberts at the end of June, pleading for a spinoff of NBCU and British satellite company Sky. Supino argued that spinoff would result in a doubling of the price of a pure-play cable Comcast stock in three years.

Content companies are facing growing uncertainty as streaming services proliferate and traditional pay TV distributors, which have pulled most of the freight regarding affiliate fees, lose subscribers.

Content Headwinds

That perception has proven itself in the stock prices of even the biggest programmers. While the programming sector improved its position during Q2 — five of the six stocks in the segment rose above their Q1 lows — many have just barely squeaked by.

The biggest, The Walt Disney Co., finished Q2 up 15.4% to $111.51. But even with one of the most successful streaming services (Disney Plus, with about 55 million global subscribers in June) Disney stock was still far short of its Dec. 31 close of $144.63. AMC Networks, down 38.5% in Q1, fell another 3.8% in Q2. Other stocks like ViacomCBS, which fell 66.6% in Q1 to $14.01, gained more than 60% in Q2. But at $23.32, it was still nearly half the price it was at the beginning of the year.

Wells Fargo media analyst Steven Cahall said in a note he expects Disney Plus to climb to 62 million global subscribers in fiscal Q3 and to 81 million by year-end. But he believes that torrid pace will slow down, estimating 95 million subscribers by 2025.

Even Disney Plus’s exponential growth won’t be able to stem the bleeding elsewhere. Cahall estimates that total revenue for Disney, which reports results on Aug. 4, will fall 39% in fiscal Q3 to $12.4 billion.

Cahall’s caution is proven in his $118 per share 12-month price target on the stock: it closed at $118.12 on July 23. He expects shares to “remain range-bound as very strong content assets offset significant end-market uncertainty.” 

Cable One reported an 11.4% year over year uptick in second quarter revenue to $268.4 million, driven by its surging residential data and business services operations.

Residential high-speed internet revenue increased by 18.3% to $122.4 million, even with the user base only growing by 1.2% to 592,234 customers. Julie Laulis, CEO of the Phoenix, Ariz.-based operator, attributed the revenue growth to customers responding to price cuts on higher-speed tiers.

For example, with 200 Mbps tier priced at $65 a month (around 32 cents per Mbps), a number of Cable One customers saw the value in jumping from the 100 Mbps tier, which is priced at $55 (55 cents per meg).

Related: Cable One Prepping 1-Gig Rollout in NewWave Systems

“Customers are making a call on value,” Laulis told investment analysts during Thursday’s earnings call. “When we reduce the prices on faster tiers, ARPU goes cup because the selling goes up.”

Revenue from business services, meanwhile, increased by 18.4% to $38.4 million, with the customer base increasing by 8.3% year over year. With the mid-sized cable company offering products like the 2 Gbps Piranha Fiber, Laulis declared Cable One a “disrupter” in the business services market.

Cable One actually saw a 3.1% revenue increase in residential video to $87.4 million, with its video base shrinking by 11.4% year over year to 323,514.

Speaking to Cable One’s value as an acquisition target, MoffettNathanson analyst Craig Moffett noted that the company has “already lost so many of its video subscribers that, for those worried about video cord-cutting, it has been de-risked

“And the fact that they don’t make any money on video de-risks them still further,” he added.

The company reported a 57.2% jump in net income to $43.8 million.

Notably, Cable One’s financials are skewed a bit by the still-digesting 2017 New Wave acquisition. Only two months of New Wave data are included in the comparable 2017 second quarter.

Related: Cable One Touts Gigabit Deployment Milestone

The skew isn’t massive—with New Wave factored out, for example, net income increased by 57.1% to $40.5 million.

Thursday’s earnings call marked the last public appearance for retiring Cable One CEO Kevin Coyle. Former WOW chief executive Stephen Cochran will officially take over for Coyle on Aug. 13.

Mediacom Communications lost about 11,000 basic video subscribers in the second quarter, an improvement over the 12,000 it lost in the same period last year, as high-speed data and telephony additions also rose in the period.

Mediacom ended the quarter with 14,000 more high-speed data customers (compared to 10,000 additions in the same period last year) and phone customer additions more than doubled to 10,000 in the period versus 4,000 in the prior year.

Those improved subscriber metrics helped boost revenue for the period up 4.4% to $450.8 million and OIBDA up 4% to $172.7 million.

Mediacom ended the quarter with 1.3 million customer relationships, up 2.5% from the prior year.