Cable Operators

Time Warner Cable: Lowest Of The Low Valuations

4/19/2009 8:14 AM Eastern

Cable stocks are at all-time low valuations and, according to Sanford Bernstein cable and satellite analyst Craig Moffett, Time Warner Cable is the pick of the lot.

In a research report last week, Moffett said that TWC is trading at 4.8 times 20009 estimated cash flow, Comcast at 4.9 times and Cablevision Systems at 4.7 times, all-time lows considering the sector was trading as high as 20 times forward-looking cash flow in the late 1990s.

“Among the three, we find Time Warner Cable the most compelling combination of equity upside with minimal downside risk,” Moffett wrote.

Moffett believes Time Warner Cable could have the biggest upside potential because of several factors, most dramatically the potential for paying down debt.

Moffett predicted that TWC stock could rise to nearly $66 per share (a 27.2% compound annual growth rate from its $27.80 per share April 14 close) by 2012 if TWC performs as expected and uses its free cash flow to pay down debt. The stock could jump to $83 each (a 34.4% CAGR) of the trading multiple rises to Moffett’s target level of 5.5 times. Even if the multiple remains stagnant and TWC has no growth at all, Moffett predicted that the stock should reach $42 each (a 12.2% CAGR) by 2012.


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