News

Battered Cable Stocks Regain Some Ground

6/04/2000 8:00 PM Eastern

Cable stocks held their own and some even saw substantial gains last week, as the National Association of Securities Dealers Automated Quotation system experienced its largest one-day percentage gain in history.

Investors came back from the three-day Memorial Day weekend with an eye toward bargains, spiking the NASDAQ by about 254 points, or 7.9 percent, to 3,454 May 30 and shifting their focus to telecommunications and technology stocks.

The NASDAQ surge came just one week after the exchange hit its lowest point since Nov. 10-3,164.55.

Adelphia Communications Corp.'s stock rose by $4.13 per share May 30, or 10.6 percent, fueled by reports of plans to expand its digital rollout. The MSO announced last week that it would buy 1.6 million "Explorer 3000" digital set-top boxes and 40 digital headends from Scientific-Atlanta Inc. by the end of 2001.

S-A shares also surged on the news, up $6.14 each (12.1 percent) to $57.

Cable stocks, relatively unscathed by the previous week's NASDAQ slide, were among the beneficiaries of the May 30 buying surge, with shares in Comcast Corp., Cox Communications Inc. and Charter Communications Inc. all reporting large gains.

Comcast shares were up $2.63 each (8.4 percent) to $34 per share; Charter was up $1.31 (12.4 percent) to $11.88; and Cox was up $2.25 (5.6 percent) to $42.06. Comcast and Cox benefited from an upgrade by analyst Richard Bilotti at Morgan Stanley Dean Witter & Co.

Another cable stock that posted a hefty gain was Time Warner Inc., which rose $6.65 per share (9.2 percent) to $78.88. Time Warner's merger partner, America Online Inc., increased $5.06 (10.4 percent) to $53.56.

Credit Lyonnais Securities USA Inc. analyst Richard Read said the upward trend for the cable sector was likely due to investors looking for bargains, as well as market confidence that these companies will successfully execute their business plans.

Read said cable stocks were trading between 5.5 times and 6 times analog cable cash flow in July 1997, just prior to Microsoft Corp.'s $1 billion investment in Comcast, which sent the sector to record highs.

Although it was doubtful that the cable sector would return to those highs anytime soon, Read said, the current rise could be a sustainable one.

"Most [cable companies] seem to be executing well, and I don't think they're deviating from their game plan," Read said. "A whole lot of people didn't want to pay 14 [times], 15 [times], 16 times cash flow for these stocks. There doesn't seem to be a catalyst [for the most recent rise]. They're following their business plans."

Several MSOs posted slight gains in May 30 trading, including AT & T Corp. (50 cents per share, 1.5 percent), MediaOne Group Inc. (44 cents, 0.94 percent), Insight Communications Co. Inc. (50 cents, 3.6 percent) and Mediacom Communications Corp. (13 cents, 1.6 percent).

On the programming side, gains were more modest, although Viacom Inc. surged $4.75 each (8.5 percent) to $60.63 per share.

Cable-technology stocks, hammered the week before, also regained some ground. Motorola Inc. gained $4.31 per share last Monday to $96.44, after rising $4.25 the prior week.

Terayon Communication Systems Inc. was up 27.9 percent last Monday, or $11.38 per share, to $52.13, and Gemstar International Group Ltd. was up 22.6 percent ($7.81 each) to $42.31.

Gains held up in the next day of trading for some of the cable companies, with Comcast surging 11.4 percent May 31 to $37.88, Terayon up 6.5 percent to $55.50 and Cox up nearly 4 percent to $4.83.

Those stocks that lost ground May 31 didn't lose much, including Adelphia, which fell 1.7 percent to $42.38. Motorola dipped 2.8 percent to $93.75 each and AT & T dropped 1.9 percent to $34.69.


Cable Highfliers

Company 5/30/00 Price Price Gain % Gain


Terayon Communication Systems Inc.


$52.13


$11.38


27.9%


Gemstar International Group Ltd.


42.31


7.81


22.6


TV Guide Inc.


26.00


3.88


17.5


Charter Communications Inc.


11.88


1.31


12.4


Scientific-Atlanta Inc.


57.00


6.14


12.1


Adelphia Communications Corp.


43.13


4.13


10.6


America Online Inc.


53.56


5.06


10.4


Time Warner Inc.


78.88


6.65


9.2


Viacom Inc.


60.63


4.75


8.5


Comcast Corp.


34.00


2.63


8.4


Cox Communications Inc.


42.06


2.25


5.6


The Walt Disney Co.


42.00


2.13


5.3


Motorola Inc.


96.44


4.31


4.7


Insight Communications Co. Inc.


14.50


0.50


3.6


Mediacom Communications Corp.


8.00


0.13


1.6


AT & T Corp.


35.00


0.50


1.5


Source: NASDAQ Web site

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