In a move that is likely to affect stock prices this morning, influential media analyst Craig Moffett downgraded the cable distribution sector to “neutral” Tuesday, adding that after a long bull run the stocks are fairly valued.
In his report Moffett noted that industry leader Comcast stock has nearly tripled over the past five years and Charter, the second largest cable company in the country has quadrupled. With those stocks besting the S&P 500 by 90 and 260 percentage points, respectively, “the room for a differentiated upside forecast has narrowed,” Moffett wrote.
Comcast, at $41.80 per share is just 7% off Moffett’s 12-month target price of $45 per share and Charter, at $340.26 is above his $337 target.
RELATED: Analyst says the cord-cutting future has arrived
Moffett has said repeatedly that the cable sector has managed to offset subscriber declines in the video portion of the business through gains in broadband. And while he expects that to continue – Comcast actually gained video customers last year for the first time in a decade – he wondered if broadband pricing is sustainable.
“But the question is: just how much will they have to adjust broadband pricing?” Moffett wrote. “And more to the point, how will the market value cable operators that are increasingly reliant on flexing their pricing muscle? Ultimately what matters is valuation.”
Moffett lowered his ratings on Comcast and Charter to "neutral" and maintained is 'sell" rating on Cable One. He also maintained his "neutral" ratings on telcos AT&T and CenturyLink, as well as his "buy" rating on Verizon.