Pali Research media analyst Richard Greenfield raised his rating on Time Warner Cable from “sell” to “neutral,” stating that while he is still concerned about some competitive issues the second largest cable operator faces, he believes they are reflected in the current valuation of the stock.
In a research note Monday, Greenfield wrote that TWC is trading at about 10 times his below consensus earnings estimate of 91 cents per share, 8.8 times 2009 estimated free cash flow and 4.7 times 2009 estimated earnings before interest, taxes, depreciation and amortization (EBITDA).
While Greenfield added that he remains worried about the impact of a slowing economy, rising competition (especially from Verizon Communications’ FiOS TV product in New York City) and potentially difficult retransmission consent and programming negotiations, he thinks “TWC’s current valuation more accurately reflects the risks to 2009 earnings growth.”
Greenfield has been a vocal critic of TWC and has warned that the company’s exposure in Spanish-speaking markets (about 46% of the U.S. Hispanic population lies within TWC service territory) could leave it vulnerable to Spanish-language broadcaster Univision Communications’ retrans demands. Univision has been said to be asking cable and satellite operators up to $1 per subscriber per month in retrans fees. Last week, a report noted that TWC’s contract allows it to carry the satellite feed of the Univision network until the end of next year. TWC has to renegotiate retrans deals with local Univision-affiliated TV stations this year.