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Cable One (CABO -1.1%) has given up earlier gains, moving lower with the broader market, after Wells Fargo upgrades to Overweight ahead of an upcoming Investor Day.
That comes after the bank downgraded the cable sector en masse last October, amid widespread analyst expectations that cable broadband subscribers would feel pressure from growing competition in fiber and fixed wireless.
“Though we recognized CABO’s differentiated competitive positioning in rural markets, we felt there would be risk to multiples across the board, and CABO could see some of the industry’s net add pressures,” analyst Steven Cahall and team say.
Now after Cable One’s fourth-quarter earnings, “we walk away with more conviction that CABO is in fact unique.”
Cable One is about 1/30th the size of larger rivals Comcast and Charter, so despite a sectorwide slowdown in residential broadband, “what happens in the Cable industry need not necessarily be applicable to CABO’s smaller and rural footprint,” Wells Fargo says. Gross adds there have remained strong in contrast to the big players.
Meanwhile, given the competitive insulation, the bank sees Cable One’s capital intensity actually falling over the next few years.
It has a $2,100 price target, implying 48% upside.
Cable One has an investor day set for Thursday at which Wells Fargo says it’s looking for more information about underappreciated minority investments by the company.
Source: seekingalpha.com
