Bernstein Ups Comcast, TWC, At Higher Multiple
Analyst Craig Moffett Cites ‘Lower Capital Intensity’ at Cable Firms
By Kent Gibbons -- Multichannel News, 5/5/2009 9:19:29 AM
Comcast and Time Warner Cable results -- especially a coming Comcast bandwidth expansion at relatively low cost -- merit higher price targets on their stock, Sanford Bernstein analyst Craig Moffett said in a note to clients Tuesday.
He raised the target multiple (of 2009 cash flow) on the stocks to 6 times, which upped the Comcast 12-month target price to $20 from $18 and the Time Warner Cable price to $47 from $39. Comcast closed yesterday at $16.65 and TWC closed at $35.
The higher multiple reflects Bernstein’s expectation of lower capital intensity in the future, Moffett said. His Comcast note went into great detail about the cable firm’s “Project Cavalry” rollout that will create capacity for as many as 200 channels of HD at a cost of about $40 per subscriber. The rollout could be completed for a cost of about $1 billion over the next two years, mostly capitalized in set-top costs, he estimated.
Beyond the possible financial return on that expanded channel capacity, “the real value is strategic,” Moffett said.
He also cited cable’s rollout of DOCSIS 3.0 “wideband” Internet service as unleashing the platform's potential and compared the deployments to Verizon’s FiOS network rollout at estimated cost of $4,000 per home.
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