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What Makes Altice (ATUS) a Promising Investment Option?

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Zacks Equity Research
·5 min read
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Despite the coronavirus-induced market volatility, earnings estimates for the current and next fiscal for Altice USA, Inc. ATUS have increased 24.6% and 23%, respectively, over the past 90 days. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Drivers

Notwithstanding challenging macroeconomic conditions associated with the pandemic, Altice is on track with its five-year plan to build a FTTH (fiber-to-the-home) network and deploy its new home communications hub. The company believes that the FTTH network will be more resilient with reduced maintenance requirements, fewer service outages and lower power usage, which is likely to lead to further cost efficiencies. This network will allow Altice to satisfy demand for increasing speeds and support evolving technologies, such as the expected transition of mobile networks to 5G and enable it to capitalize on associated revenue-growth opportunities. Additionally, the company is building a next-generation fiber network capable of delivering broadband speeds of 10 Gbps, reflecting continued investments in technology and innovation for its customers in the United States.

Altice has augmented its market position as a pioneer in the advertising business with the launch of a4 — an advanced advertising tool — to provide audience-based, multiscreen advertising solutions for its clients. From being the first MVPD (multichannel video programming distributor) partner to offer addressable advertising solutions in the New York DMA, Altice has evolved as a leading player in this segment and has subsequently created a niche for itself. With a4, Altice has brought to the fore unique skill sets for advertisers to identify the target audience across screens and local and national TV. They can then create an effective media plan, execute the buy and measure cross-screen reach, frequency and attribution to measure the efficacy of the program. Leveraging the superior reach of a4, advertisers can reportedly extend their content to more than 90 million households, 85% of broadband subscribers and 1 billion devices in the United States. This would significantly benefit advertisers to screen their advertising messages to target pool of audience, thereby reducing operational cost. This, in turn, will likely help it to attract a larger pool of advertisers and generate incremental revenues in the long run.

The acquisition of Cheddar, a live streaming financial news network, has extended Altice’s portfolio of high-quality news coverage across digital, mobile and linear TV formats. Cheddar complements Altice’s hyperlocal and global news offerings that include the most watched news channel in the Optimum footprint News 12 Networks, and international and current affairs news network i24NEWS. The combination of Cheddar and Altice businesses is likely to offer more opportunities for collaborative and complementary programs, thus fortifying its presence in the cut-throat news market. The buyout further enables Altice to reach out to a wider audience pool and monetize content through its a4 advertising platform. It is on track with new growth initiatives, including the launch of wireless service, accelerating fiber-to-the-home deployment and enhancing the growth of advanced advertising and news platforms, including Cheddar.

Moving forward, Altice plans to deploy a nationwide mobile service — Altice Mobile — to provide seamless, simple and reliable connectivity to customers. The mobile service is a network of networks that delivers advanced LTE coverage by combining the company’s fiber and mobile infrastructures with two of the best networks in the United States. Altice LTE leverages AT&T Inc’s T LTE networks for nationwide coverage and offers a single plan with unlimited data, text and talk nationwide, mobile hotspot, video streaming, international text and talk to more than 35 countries, including Canada, Mexico, Dominican Republic and Israel.

With a VGM Score of A, this stock appears to be an enticing investment option in the volatile market.  The stock has gained 13% in the past three months compared with the industry’s growth of 11.1%.

Other Key Picks

Some other top-ranked stocks in the industry are Ooma, Inc. OOMA and Corning Incorporated GLW, carrying a Zacks Rank #2.

Ooma delivered a positive earnings surprise of 238.9%, on average, in the trailing four quarters.

Corning has a long-term earnings growth expectation of 2.4%. It delivered a positive earnings surprise of 39.9%, on average, in the trailing four quarters.

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