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Forget LBTYA, Buy These 3 Cable TV Stocks Instead in 2019

Aniruddha Ganguly

Liberty Global Plc LBTYA has had a horrifying year so far, due to continuing subscriber loss in video and cable. Moreover, weakness in countries like Belgium and Switzerland has hurt top-line growth throughout 2018.

Notably, Liberty Global provides residential and business-to-business (B2B) communication services in Belgium through Telenet Group Holding, a 57.7%-owned subsidiary. Through UPC Holding B.V. it provides services in Switzerland.

Further, Liberty Global is facing regulatory scrutiny. Reportedly, Belgian competition agency will now examine the company’s bid for publisher De Vijver Media. Additionally, the company’s divestiture of its assets in Germany and Eastern Europe to Vodafone (VOD) is now facing a full-scale investigation (Phase 2 review) by European Union (EU) antitrust regulators.

Year to date, the stock has lost 41.1% compared with the industry’s decline of 22.7%.



 

Subscriber Loss Hurts Most

Liberty Global continues to suffer from a loss of subscribers or revenue generating units (RGUs), primarily due to cord-cutting amid significant competition from streaming providers like Netflix NFLX. In the nine months ended Sep 30, 2018, the company lost 120,100 video RGUs compared with a loss of 55,300 in the year-ago period.

Moreover, the company has lost significant number of RGUs in Belgium (99,800 against 41,900 in the year-ago nine-month period) and Switzerland (139,000 against 18,300 in the year-ago nine-month period), primarily due to stiff competition. Liberty Global’s decision to raise prices in July in Belgium also negatively impacted churn rate.

In U.K./Ireland, where Liberty Global provides services through Virgin Media, the company has gained 262,400 RGUs. However, the gain is much lower than 328,500 RGUs it added in the year-ago period.

Continuing CEE (Poland, Slovakia and DTH) is the only region where Liberty Global has gained 4,900 RGUs, against the year-ago period’s subscriber loss of 43,600.

Can Liberty Global Stage a Comeback in 2019?

Liberty Global has been divesting assets to concentrate on smaller number of European markets where it can grow rapidly.

Notably, in January 2018, the company completed the spin-off of its Latin American and Caribbean operations into a new, independent, publicly-traded company — Liberty Latin America Ltd. On Jul 31, 2018, the company completed the sale of its operations in Austria.

Apart from the Vodafone deal, which is under investigation, the company is also selling its DTH satellite TV operations to M7 Group for a total enterprise value of about €180 million (£163 million). The company’s DTH satellite TV operations serve four east European markets — Hungary, Czech Republic, Slovakia and Romania.

Apart from divestitures Liberty Global is expected to benefit from an expanding subscriber base on its next-generation video platforms, including Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV. However, these might not be enough to negate a rapid decline in subscriber base.

Moreover, Liberty Global has a Zacks Rank #5 (Strong Sell) that indicates a bleak scenario for 2019. The Zacks Consensus Estimate for fiscal 2019 earnings has also moved down 37.8% to 46 cents over the past 60 days. Hence, investors can only hope for some astonishing turn of events for now.

Our Picks

Here we pick three cable TV stocks that are expected to outperform both Liberty Global and market in 2019. Apart from having strong fundamentals, these stocks either flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) that offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary-based Shaw Communications SJR flaunts a Zacks Rank #1. The company’s wireless business, which covers almost half of the Canadian population, is benefiting from an increase in subscriber base and improvement in average revenue per unit (ARPU). Moreover, Shaw Communications’ initiative to deploy 700 MHz and 2500 MHz spectrum further improves the network quality.

The company delivered average positive earnings surprise of 19.9% in the trailing four quarters. The Zacks Consensus Estimate for its 2019 earnings has jumped almost 1% to $1.05 over the past 60 days.
 

Shaw Communications Inc. Price and Consensus

Shaw Communications Inc. Price and Consensus | Shaw Communications Inc. Quote

 

Andover, MA-based Casa Systems CASA has a Zacks Rank #2. The ongoing cable DOCSIS 3.0 infrastructure upgrades are expected to benefit the company in 2019. Moreover, Casa is expected to gain on growing customer demand for bandwidth that is driving software sales.

Casa delivered average positive earnings surprise of 29.7% in the trailing four quarters. The Zacks Consensus Estimate for its 2019 earnings has remained steady at 95 cents over the past 60 days.
 

Casa Systems, Inc. Price and Consensus

Casa Systems, Inc. Price and Consensus | Casa Systems, Inc. Quote

 

Englewood, CO-based DISH Network’s DISH focus on acquiring and retaining subscribers that are profitable over the long term is a key catalyst. Moreover, the company’s extensive portfolio of spectrum, the most important component of wireless networks, is a positive.

This Zacks Rank #2 stock delivered average positive earnings surprise of 10.4% in the trailing four quarters. The Zacks Consensus Estimate for its 2019 earnings has increased 4.7% to $2.47 over the past 60 days.
 

DISH Network Corporation Price and Consensus

DISH Network Corporation Price and Consensus | DISH Network Corporation Quote


In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>


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Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
DISH Network Corporation (DISH) : Free Stock Analysis Report
 
Shaw Communications Inc. (SJR) : Free Stock Analysis Report
 
Liberty Global PLC (LBTYA) : Free Stock Analysis Report
 
Casa Systems, Inc. (CASA) : Free Stock Analysis Report
 
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