Cable Stocks Take Punch, Too

3/18/2001 7:00 PM Eastern

Cable investors were in for a scare last week as the sector got caught up in a massive sell-off on Wall Street, but while many cable stocks were bruised during the first four days of the week, most were not battered.

The NASDAQ exchange lost a total of 111 points between March 12 and March 15, with its biggest drop coming on March 12-a 129.4 point decline to 1,923.38. It was the first time since December 1998 that the exchange dipped below 2,000.

The Dow Jones Industrial Average had the largest decline, falling a total of 612 points in those four days finishing at 10,031.28 on March 15.

Some cable stocks experienced sharp declines in the first days of the market turmoil-AOL Time Warner Inc. dipped 8 percent, or $3.60 per share, last Monday to $39.27-but many regained at least some of their lost ground.

SG Cowen Securities Corp. analyst Gary Farber said the performance of cable stocks was further proof that the sector is one of the more stable sectors in the market. For example, technology and telecom issues were slammed during the sell-off, with some stocks in those sectors losing as much as 50 percent or more of their value. Among cable operators, the biggest percentage decline over the four days was 8.1 percent.

"They [cable stocks] have had less overall declines than the other sectors," Farber said of Monday's sell-off. "When the market is like this, it's almost like a domino effect."

ABN AMRO Bank cable analyst John Martin, speaking at a Kagan Seminars Inc. conference in New York on Tuesday, said cable operators-excluding AOL Time Warner and AT&T Corp.-were ahead about 15 percent on the year.

"Cable's got momentum," Martin said. "There is reasonably little risk to the stocks."

Martin said that because of gains due to the successful rollout of new services like digital cable and high-speed data and the prospect of advanced services like video-on-demand, interactive services and voice services, he expects cable companies to average 13-percent cash flow growth over the next two years.

"Investors have flocked to that," Martin said.

Still, cable stocks got hammered on March 12, with the biggest loser being AOL Time Warner, which lost about 8.4 percent, or $3.60 per share to close at $39.27 on that day. Other big losers on the day were Adelphia Communications Corp., which dropped $2.13 per share to $38; Comcast Corp., down $2.13 to $43.25; Cox Communications Inc., down $1.08 to $41.41; Insight Communications Co., down $1.75 to $24.06 and AT&T Corp., down 94 cents to $22.67.

The sell-off was a little less dramatic at Cablevision Systems Corp., which lost 44 cents to close at $84.06 on March 12. Classic Communications Inc. fell 6 cents to $2.94 and Mediacom Communications Corp. was off 25 cents to $20.75.

By Thursday, many of the stocks had won back some of that ground, with Cablevision the sole operator that actually showed a gain over the period, closing March 15 at $85.94, more than $1 above its March 12 opening price of $84.50.

Among the other MSOs, Comcast closed March 15 at $42.50, Adelphia closed at $38.88, Charter Communications Inc. at $22.75, Cox at $42.36, AT&T at $23.40, Insight at $23.75, Classic at $2.81 and Mediacom at $19.80.

In the programming sector, Viacom Inc. and The Walt Disney Co. Inc. were both pounded on Monday after Credit Suisse First Boston analyst Laura Martin cut her earnings estimates for both stocks based on a weak advertising market.

Viacom fell $4.24 each to $45.31 after Martin said she expected first quarter losses to widen to 11 cents per share from 8 cents per share. Martin kept her "strong buy" rating for Disney, but cut her 2001 earnings estimate from $1.02 per share to 95 cents. Disney shares dropped $2.21 each to $27.51.

USA Networks Inc., another advertising-dependent programmer, was down $1.13 each on Monday to $22.25.

By Thursday USA was up to $22.56, Viacom to $47.85 and Disney to $27.99.


Last week's stock-market declines had some effect on junk bonds, but analysts see the market for cable high-yield debt as showing continued strength.

That should be good news for Cablevision and Charter, both planning to issue billions of dollars in high-yield debt.

CSC Holdings, a holding company for Cablevision, sold about $1 billion in 10-year notes in a private placement Thursday. Charter, which filed a shelf registration for a $4-billion high-yield offering earlier this month, is expected to price that offering shortly.

UBS Warburg high-yield cable analyst Aryeh Bourkoff said that overall the high-yield market is "jittery" because of falling equity prices, a slowing economy and business models that are not funded to free cash flow.

However, he added that most of the concern is in the telecommunications sector. Cable high-yield bonds are believed to be a good bet because of the relative stability of the industry even in adverse economic times.

Mediacom Communications Corp. also is expected to issue more high-yield debt later this year, largely to fund its $2.2 billion acquisition of 840,000 subscribers from AT&T Broadband. But Mediacom too is a recent issuer-it sold about $500 million in senior notes in January.

Bearing Down/Here's how programming and MSO stocks fared in last week's downdraft:

Company 3/09 3/15 % change

























AOL Time Warner




USA Networks




















Source: NASDAQ

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