Citigroup Ups Cablevision To ‘Buy’ From ‘Sell’
Analyst Says FiOS Fears Have Proven Unfounded; Pali Ups Cablevision, Too
By Kent Gibbons -- Multichannel News, 8/1/2008 7:34:00 AM
Citigroup changed course on its Cablevision stock rating, to “buy” from “sell,” saying the New York-centric cable company has shown it can outperform expectations even in the face of widespread competition from Verizon’s FiOS TV and Internet offerings.
“In effect, our FiOS-centric thesis was wrong,” analyst Jason Bazinet wrote in a note Friday morning, the day after Cablevision released second-quarter operating numbers. “Cablevision’s performance has been much better than we ever imagined. Truth is, Cablevision’s operational and financial results that have been so robust, we can’t even tell FiOS is competing within Cablevision’s footprint.”
Citigroup upped its price target to $29 from $23. Cablevision zoomed past the $23 figure on Thursday: it closed at $24.28, up $3.03 or 14.2%, according to NASDAQ.
Pali Capital analyst Rich Greenfield also upgraded Cablevision (CVC) to “buy,” from “neutral,” with a $32 price target.
Citigroup’s Bazinet – who put a “sell” rating on Cablevision in October 2007 – also said that, essentially, Cablevision would be priced higher today had it not been for a "buying spree” (acquiring Sundance Channel and the newspaper Newsday) and plans to spend material sums on a Madison Square Garden renovation and a WiFi network. “As such, over the last few months, equity holders were faced with a mixed bag of great news (the fundamentals) and bad news (M&A and capex).”
Pali’s Greenfield, cited past concerns with Cablevision’s buying or attempting to buy “several non-core assets (outside the cable biz) at what we viewed as premium valuations,” particularly Newsday. He said in a note Friday that the company’s recent acquisition streak ran in stark contrast to the prior two years, in which the Dolan family sought to take the company private at higher and higher levels. It tried to take Cablevision private for $36.26 last October, and was rebuffed.
After that failure, Greenfield said, “the Dolans appeared to turn almost hostile toward investors, with management refusing to speak at investor conferences, shunning investor meetings and they decided to stop issuing any form of financial guidance.
“Now in a dramatic shift, the Dolans appear to care about investors again,” Greenfield wrote in the Friday note.
CEO James Dolan said on an analyst call Webcast Thursday the company would be more outgoing at investor conferences and was focused on raising the stock price, or as he said closing a valuation gap. Greenfield interpreted that as saying Jim Dolan and his father, chairman Charles Dolan, are no longer interested in making major acquisitions.
Greenfield said trying to take the company private again could be an unrealistic option, given current credit markets. But other avenues the Dolans could explore include making substantial share repurchases and spinning off or selling the Rainbow programming assets.
