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No Cord Cutting: KeyBanc Prefers Cable Over Wireless In Broadband Picks

Jayson Derrick

Cable stocks warrant a premium valuation, as the sector is a better business than wireless, KeyBanc Capital Markets said in an industrywide report.

The Analyst

KeyBanc's Brandon Nispel and Maddie Schrage initiated coverage of the following stocks:

  • Altice USA Inc (NYSE: ATUS): Overweight, $25 price target.
  • Cable One Inc (NYSE: CABO): Sector Weight, $700 fair value.
  • Charter Communications Inc (NASDAQ: CHTR): Sector Weight, $280 fair value.
  • WideOpenWest Inc (NYSE: WOW): Sector Weight, $9 fair value.
  • Coverage of Comcast Corporation (NASDAQ: CMCSA) was transferred: Overweight rating, $38 price target.

The Thesis

The analysts named four reasons why the stocks remain more favorable to own:

  • Prospects for higher growth.
  • Lower capital intensity should result in expanding free cash flow profiles.
  • Superior profitability.
  • Less competition.

Cable broadband subscriber and market share growth is expected to slow, which implies investors may want to be more selective in their stock ownership, according to KeyBanc. 


  • Altice boasts an attractive broadband business which should generate steady or improving subscriber trends.
  • The recent end to a programming dispute should yield better products for customers. 
  • The company's industry-leading adjusted EBITDA margins makes its business "more defensible."

Cable One

  • Cable One's growth prospects are "limited" in existing markets.
  • The company's business is exposed to competition.
  • The company may need to establish a "more aggressive inorganic growth strategy" to finance its growth.


  • The premium awarded to Charter's stock above-average broadband subscriber growth is "overvalued."
  • Charter's broadband growth is likely to decelerate at a faster rate compared to its peers.
  • The company's lower bundled customer mix makes it less favorable to own compared to some of its peers.

WideOpen West

  • WideOpen faces the most competition in the broadband space.
  • While the company is improving organic broadband subscriber growth, it is also taking a rate increase.
  • Nevertheless, the stock's valuation at 6.5x 2019 EBITDA estimates is a discount to cable peer average at 7.8x, so the stock is "relatively inexpensive."

Related Links:

Altice Has 50% Upside Potential, Buckingham Says In Bullish Initiation

Charter Communications Succeeds In Turnaround Effort, Wells Fargo Says In Upgrade

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