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Moffett Rethinks TV Sector

Influential Sanford Bernstein cable and satellite analyst Craig Moffett reduced his 12-month targets for a handful of cable and satellite stocks and raised them slightly for Comcast and Time Warner Cable, adjustments made in light of continued basic customer losses and the recent upheavals in the overall stock market.
Moffett had the harshest view for Cablevision Systems, reducing his 12-month price target for the stock from $27 per share to $20 per share, citing disappointing second quarter results and his expectation for further losses. The analyst maintained his "market perform" rating on the stock, though.

Moffett made slight adjustments to his targets for Dish Network (reducing it from $31 to $30 per share) and for DirecTV (from $51 to $49 per share), predicting continued "profitability but diminished subscriber growth prospects ahead."

Moffett did reward Comcast for a strong second quarter, raising his 12-month price target for the largest cable operator in the country to $32 from $31 per share. And though Time Warner Cable disappointed some analysts with higher than expected basic customer losses in the period, Moffett cited its continued strong financial performance in raising his 12-month target on the stock to $88 per share from $83 per share.
Moffett maintained his "outperform" rating on Comcast and Time Warner Cable, as well as his "market perform ratings for Dish and DirecTV.
In his report, Moffett said the double whammy of customer losses and the overall market malaise has hit the stocks hard. He added that despite outperforming expectations on financial metrics, "the story is now about subscribers." Cable and satellite lost more customers than ever in the second quarter, which has fueled some fears that cord-cutting is back. Coupled with the downturn in the stock market - the Dow Jones Industrial Average has sunk more than 1,800 points in the past month - and it has not been a good time to be a cable investor.
In his report Moffett said that all cable stocks have been hit hard in the past month - between July 5 and Aug. 22 Cablevision declined 21.7%; Dish was down 15.8%; Comcast down 8.1%; Time Warner Cable lost 8% and DirecTV fell 3.9% -- and all have underperformed Standard & Poor's S&P 500 Index. While it is understandable for Dish and Cablevision which in addition to being the poorest operationally in the quarter have been affected by outside issues - a murky wireless strategy for Dish and financial leverage issues for Cablevision - the two best operational performers in the sector (Comcast and TWC) have been battered too.
That, Moffett wrote, has significantly undervalued Comcast and TWC - he estimated Comcast is trading at about 4.7 times cash flow, a full turn below its trading multiple a month ago - which prompted him to raise his targets for the stocks.
The moves didn't appear to have a dramatic effect on the stocks in early trading - Comcast was up 0.5% (10 cents) to $20.16 each; Time Warner Cable rose 0.3% (18 cents) to $63.02; Cablevision declined 0.3% (5 cents) to $17.27; Dish Network rose 1.2% (27 cents) to $22.26 and DirecTV was up 0.1% (2 cents) to $42.63 per share.