Time Warner Cable Reverts to Neutral - Analyst Blog
April 12 2013 - 2:50PM
Zacks
We upgrade our recommendation to Neutral on Time Warner
Cable Inc. (TWC), the second largest cable MSO in the
U.S., ahead of its first quarter of 2013 financial results.
Why the Upgrade?
We expect Time Warner Cable to perform well in the near future
mainly due to: (1)acquisitions of NewWave, NeviSite, and Insight,
which have enhanced the company’s financials and (2) growing demand
for residential high-speed Internet service and Business services
segments.
We view the change in Time Warner Cable’s business model as
positive. The U.S. pay-TV industry is at present facing significant
challenges from several fronts. Economic volatility in the U.S.,
growing competitive threat from fiber-based TV services of telecom
operators and availability of online video streaming services, have
imposed mounting pressure on the traditional pay-TV operators.
As a survival strategy, management has decided to adopt a four
pronged approach: (1) rebrand itself as a major broadband service
provider for residential customers (2) aggressively penetrate the
commercial business segment (3) change in marketing strategy like
product segmentation and (4) significant enhancement of
shareholders’ wealth, such as systematic share repurchase and
increase in dividend rate. At present, Time Warner Cable has a
Zacks Rank #3 (Hold).
Balanced View on Time Warner Cable
Meanwhile, the company continues to losebasic video subscribers
without any interruption since 2009. We do not know when this trend
will ultimately reverse. Growing competitive threats from telecom,
satellite TV and online video streaming operators along with
steadily increasing programming costs are taking a heavy toll on
Time Warner Cable’s finances.
Unlike rival Comcast Corp. (CMCSA), the company
is suffering from lack of any media asset. Similarly, unlike
DIRECTV Inc. (DTV), Time Warner Cable is lacking
geographical diversification as it operates only within the U.S.
DISH Network Corp. (DISH) is trying hard to become
an integrated wireless-satellite TV bundled service provider.
Nevertheless, over the last three years, the company has been
systematically enhancing its shareholders’ wealth either through a
share repurchase program or by increasing its dividend rate. The
Board of Directors of Time Warner Cable decided to hike its regular
quarterly dividend from $0.56 per share to $0.65 per share, a
significant jump of 16%.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
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