Moffett Upgrades Cable Sector

MoffettNathanson principal and senior analyst Craig Moffett raised his rating on the cable sector to “overweight” on Wednesday, citing the sector’s improved basic-video subscriber performance even as cord-cutting continue to chip away at the overall pay TV customer base.

“Time heals all wounds,” Moffett wrote in a recent report to clients.

In a 35-page report, Moffett wrote that despite the true emergence of cord cutting – he says they are now “front and center” – cable has turned in some of its best subscriber performance in years, dramatically slashing losses.

“Cable isn’t just holding its own, it is dramatically improving video even as the sector has trended down” Moffett wrote.

Moffett said declines in the satellite sector – especially at DirecTV – and the loss of telco TV subscribers in the second quarter also bolster the case for cable. But he added that he does not expect the competition to take it lying down.

Already AT&T has announced some aggressive promotions and Moffett expects that to continue and then-some to help the phone giant justify its recent purchase of DirecTV.

“Still, Cable’s advantages are becoming clearer even as sector contraction accelerates,” Moffett wrote.

As far as individual companies, Moffett raised his rating on Charter and Comcast to “buy,” with a 12-month price target of $210 and $67 per share, respectively. Moffett also maintained his “neutral” on Time Warner Cable ($204) and Cable One ($380), and kept his “sell” on Cablevision Systems ($9).