Sector Snap: Cable companies

Baird analyst initiates coverage of cable industry at 'Neutral,' saying shares fairly valued

Associated Press

NEW YORK (AP) -- A Baird analyst on Friday initiated coverage of a handful of cable companies, saying that while their finances as a group are strong, their shares are fairly valued.

William Power said that said that the U.S. cable industry has many positive attributes including strong high speed data positioning, business services traction and strong free cash flow. But after several years of strong stock performance and recent peak prices, the analyst said he's wary of buying shares right now and advised investors to wait for a price drop before doing so.

Power gave "Neutral" ratings to Charter Communications Inc., Comcast Corp., Cablevision Systems Corp. and Time Warner Cable Inc.

In particular, Power said that Comcast boasts a strong financial performance, but its shares are expensive and have been outperforming the overall industry recently. Meanwhile, Time Warner shares have lagged the overall group over the past year, but have still risen considerably over the past three-year and five-year periods, he said.

Power said that many investors like Charter's turnaround story, but its stock performance and share price already lead the group. And he said that while he's concerned about potential stiff competition in Cablevision's core markets, it still appeals to some investors.

In afternoon trading, Comcast shares fell 52 cents, or 1.2 percent, to $41.60; Charter rose 76 cents to $105.31; Cablevision rose 4 cents to $14.43; and Time Warner Cable fell 6 cents to $97.42.

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