Needless to say, the telecom and content revolution, which has been spurred on by the leaps and bounds in the wireless industry, are changing the way everything is viewed and packaged now. The days of the cable company or satellite provider dictating which content will be presented are over, as over-the-top streaming of programming has become a huge force in the industry.
A new research report from Goldman Sachs makes some observations on companies that participated in the firm’s Communacopia Conference, and the firm is quite positive on four of the stocks. All are rated Buy and one is on the firm’s prestigious Conviction Buy list.
This is the one that makes the Goldman Sachs Conviction Buy list, and it is well regarded across Wall Street. Altice USA Inc. (NYSE: ATUS) is the fourth-largest cable company in the United States. It offers broadband, video and telephone service to 8.5 million homes and currently providing services to 4.9 million homes across 21 states, though the vast majority, roughly 75%, of the footprint is in New York and Texas.
In addition to residential services, Altice USA also offers a variety of services for business customers, as well as data-driven advance advertising capabilities. Goldman Sachs noted this in the research report:
Altice USA continues to successfully execute on a number of initiatives, including the rollout of Altice One, upgrading the network to all fiber, and launching a wireless offering in 2019. The company remains committed to video, which is still views as a core product, and it is outperforming the overall pay-tv market in terms of video revenue generating unit declines (noting it has not seen an acceleration in Optimum customer disconnects). In broadband, the company expects to achieve double-digit growth in average revenue per user for the next few years driven by increasing customer demand for data and speed. ATUS’s main priority for capital allocation remains cable M&A, reiterating that its next best use of capital, given where the share price is today, is to buy back stock.
The Goldman Sachs price target for the stock is $25, while the Wall Street consensus target is $25.61. The shares closed trading on Friday at $19.00.
This top cable giant has been linked to Verizon in takeover chatter in the past. Charter Communications, Inc. (NASDAQ: CHTR) is a leading broadband communications company and the second-largest cable operator in the United States. It provides a full range of advanced broadband services, including Spectrum TV video entertainment programming, Spectrum Internet access and Spectrum Voice.
Spectrum Business similarly provides scalable, tailored and cost-effective broadband communications solutions to business organizations, such as business-to-business internet access, data networking, business telephone, video and music entertainment services and wireless backhaul.
The company made a huge investment in Time Warner Cable, and the analysts noted this:
Charter is tracking well on its integration, which will enable all of its product offerings, pricing, packaging and service operations to be universal across its footprint. By the end of the year, the company plans to finish converting the remaining analog parts of the cable network to all-digital and upgrading the rest of the broadband network to DOCSIS 3.1. Charter is now 62% complete in its pricing and packaging efforts. Charter is seeing benefits through the prolonged average customer life cycles, and churn going down. The end goal is to create an attractive value proposition to attract and retain customers.
Goldman Sachs has a $373 price target, and the consensus target is $375.76. The shares closed Friday at $318.13.