Cable Analyst Resurfaces Looking Like a Tamer Bull

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Influential cable and satellite analyst Craig Moffett reentered the cable scene last week with a sweeping 135- page look at what he sees as the next 10 years for the industry, a decade that the analyst believes could be characterized by a limited upside for the stocks.

Moffett formed Moffett Research in May, about three months after leaving research group Sanford Bernstein, where he was a top-ranked cable and satellite analyst for about 11 years. His initiation of the cable and satellite sectors last week marked his return as one of the top analysts in the industry.

Moffett still appeared bullish on cable, and in his prediction — he estimated strong financial growth will continue for most large publicly traded distributors. His prediction that the stocks, which have been on an unprecedented runup over the past several years — for example, Comcast stock has beaten the Standard & Poor’s 500 Index by 150 points over the past four years, while Time Warner Cable has outpaced the index by 200 points — appears to be simply an exercise in the law of averages — what goes up must eventually level off or go down.

“The cable bull case is now consensus, and we no longer see material upside to intrinsic value for the sector,” Moffett wrote.

Other analysts have taken a contrarian view.

Pivotal Research Group principal and media & communications analyst Jeff Wlodarczak believes that the MSO sector has plenty of upside left, adding that the stocks trade at a material discount to telcos, have a dominant data plant, an easily upgraded plant, a number of growth opportunities (primarily levering their dominant last-mile plant), and most operators are returning capital aggressively which should support the names.

“If this is the end of cable stocks why is [Liberty Media chairman] John Malone, arguably the best media and communications investor ever, accelerating his purchases of cable assets,” Wlodarczak said. Liberty took a $2.6 billion interest in Charter Communications in May and Liberty Global, Malone’s European cable vehicle has recently been on a buying spree.

Charter was Moffett’s lone “buy” in the MSO sector, and he rated Comcast and Time Warner Cable at “neutral,” setting 12-month price targets of $44 and $101, respectively.

He was down most on Cablevision Systems, calling the Bethpage, N.Y.-based MSO “overvalued” and giving it a “Sell” rating and a $10 price 12-month price target.

Satellite stocks like DirecTV (neutral, $66) and Dish Network (neutral, $33) are more idiosyncratic, Moffett said.

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