Influential Merrill Lynch media analyst Jessica Reif Cohen re-initiated coverage of Cablevision Systems with a “buy” rating and a $41-per-share price target. She does not expect to see a new bid to take the company private from its ruling Dolan family, but believes improving fundamentals will continue to drive the stock.
Reif Cohen noted that Cablevision has the premiere cluster in the U.S. — the New York metropolitan area — and while it could see a decline in basic subscriber growth as telco video is rolled out to more areas inside its footprint, the impact should not be significant.
In her report, Reif Cohen wrote that even if Cablevision’s 3% annual basic subscriber growth dipped to 1.8%, it would still be tops in the industry.
Reif Cohen estimates the business market represents a $5.8 billion annual revenue opportunity within Cablevision’s footprint, with small and medium enterprise (SME) businesses making up about $3.5 billion of that total. With a 2,400-mile fiber network already in place — making the cost of entry into business telephony minimal — and its long-standing large enterprise telephone unit Lightpath recently connecting its 2,000th building with fiber service, Reif Cohen believes Cablevision “will be the most successful cable operator in the SME space.”
Reif Cohen was also encouraged by Cablevision’s rejection of the Dolan family’s privatization offer, adding in her report that it may “indicate the board is more willing to assert itself” when the Dolans are at odds with public shareholders.