Guidance Puts Mediacom In 'Penalty Box’


Miller Tabak media analyst David Joyce restated his “buy” rating and $10.50 price target on Mediacom Communications last week — but said the small-market cable operator could be in the penalty box after reducing year-end guidance in the midst of increased turmoil in the credit markets.

Mediacom reduced its revenue-growth projections for the year from 8%-9% to 7%-8% and lowered its cash-flow guidance from 7%-8% to 6%-7%. In a research report, Joyce questioned management’s timing of the reductions — in the middle of a meltdown in the subprime credit market — and revised his estimates for several key subscriber metrics in the third quarter.

Joyce wrote that the guidance revisions were immaterial enough for him to maintain his earlier rating on the stock, but added that Mediacom shares are “in somewhat of a penalty box for now, though, because of the guidance revision.”

Joyce now believes Mediacom will add about 1,000 basic video customers in the third quarter (versus his previous estimate of 5,000 basic additions), but increased his projections for digital-cable additions (16,000 instead of 13,000). High-speed data additions should come in at 26,000 in the third quarter, compared to his previous estimate of 39,000. Joyce also expects Mediacom to end the third quarter with 167,000 telephone customers (an increase of 23,000 subscribers) but below his previous estimate of 186,000 total telephony subscribers.

Joyce also tweaked his third-quarter growth estimates for revenue (8.7% vs. 9.3%) and cash flow (11.4% vs. 12% previously).