Oppenheimer & Co. cable and satellite analyst Tom Eagan raised his rating on Cablevision Systems to “buy” from “neutral” last week, as he expects the Bethpage, N.Y.-based cable operator to report strong fourth quarter results.
Eagan was encouraged by Cablevision’s January rejection of the Dolan family’s $30 per share offer to take the company private. He believes the market expects Cablevision has a higher valuation based on its fundamentals, and he agrees, also raising his 12-month price target on the stock to $34.
Eagan expects the company to report 15.5% cash-flow growth in the fourth quarter (an 18% annual gain) and 3% basic subscriber growth, the first time an operator has reached that milestone in several years.
The analyst also expects Cablevision to report full-year average monthly revenue per subscriber of $110, another first for large cable operators.
Eagan predicted a sale of the Rainbow Media Holdings programming arm is now more likely that the Dolan offer was rejected. He opined that the main reason to keep Rainbow was to make the privatization offer less complicated. He values Rainbow conservatively at $2.45 billion and suggested Liberty Media as a possible buyer.
“The Dolan family has clearly shown that it is interested in changing the ownership structure of the cable and Rainbow assets. It is just a matter of time, in our opinion,” Eagan wrote.
Cablevision is scheduled to report its fourth quarter and year end results on Feb. 27.