Bernstein media analyst Peter Supino lowered his price target for Altice USA to $35 per share, from $38 each on Friday, a day after the stock hit a new 52-week low and amid talk that the company would end the year with negative broadband subscriber growth.
Supino has been a proponent of Altice USA either selling or going private and other analysts have made the privatization case as well. In his Friday note, Supino wrote that Altice’s markets -- the New York metro area and the Midwest -- and its commitment to building fiber make either decision attractive.
Supino’s report comes a few days after Altice USA CEO Dexter Goei said at the UBS Global TMT Virtual Conference that it is possible the cable operator will report negative broadband customer growth in Q4 -- it lost 13,000 high-speed data subscribers in Q3 -- and could end 2021 on a negative note.
Supino’s new price target -- he maintained his “outperform” rating on the stock -- is still more than double Altice USA’s current stock price. On Dec. 9 the stock hit a new 52-week low of $14.78 per share and was trading at $15 each in afternoon trading on Dec. 10. At that price, Altice USA stock is down about 60% from the beginning of the year, when it traded at $37.87 per share.
While Altice’s visibility remains limited, Supino noted that in the cable business, “market structure and service quality trump everything else.” He added that supply and demand in Altice’s markets aren’t changing much, and by spending about $800 million per year over the next three years for fiber and upgrades, the company is obviously moving to improve its service. Add to that a too-low trading multiple -- Altice trades at around 7.3 times cash flow, compared to 9.9 times for Charter and Comcast trades at 8.3 times -- and Altice stock looks cheap.
“For resilient businesses, valuation matters most when it is very high and very low, and more so when management is aligned with investors to exploit it,” Supino wrote. “If management agrees to sell the company, our $35 price target (+133%) looks very much ‘in play.’ If they don't sell it, we own a ‘trophy case’ portfolio generating a 12% equity free cash flow yield and a 24% discretionary free cash flow yield.” ■
Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.
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