Cable stocks got a lift Monday after a favorable report by Morgan Stanley analysts, with stocks in the programming sector leading the way.
Although Morgan Stanley was optimistic about cable operators, MSO stocks were somewhat adversely affected by a Monday report from Sanford Bernstein cable and satellite analyst Craig Moffett, who said that subscriber losses could rise in the second quarter for most cable companies.
Overall it was a good day for Wall Street - the Dow Jones Industrial Average rose 104 points to 8,846.15, its sixth straight day of gains.
Leading the programming stocks was CBS - which Morgan Stanley cited as a top pick, according to reports - rising 10.1% (68 cents each) to $7.43 per share.
Two other Morgan Stanley top picks - Time Warner and Walt Disney Co. - also had a good day, with Time Warner rising 4,7% ($1.30 per share) to $27.45 and Disney gaining 3.5% (86 cents each) to $25.37 per share.
Rounding out the programming sector was News Corp., up 4.7% (51 cents) to $11.32; Scripps Networks Interactive, up 3.7% ($1.11) to $30.94; Discovery Communications, up 2.7% (63 cents) to $23.98; and Crown Media, up 22.2% (35 cents) to $1.93 per share.
According to a report on Dow Jones Newswires, Morgan Stanley upgraded the entire media sector - including newspapers like The New York Times Co. - stating that the advertising outlook for the industry is too bleak.
"We think television and in particular cable networks will not only avoid the fate of other traditional media assets but will actually thrive,:" the analysts wrote, according to Dow Jones.
Cable operator stocks rose as well, but not as much as their programming counterparts. Comcast led MSO shares for the day, rising 2.5% (35 cents) to $14.50, followed by Cablevision Systems, up 1.6% (30 cents) to $18.99 and Time Warner Cable, up 1.2% (36 cents) to $30.97. Earlier in the day, Sanford Bernstein's Moffett warned that second quarter subscriber losses may be larger than he first expected. He estimated that Comcast could lose as many as 208,000 customers in the period (compared to his previous estimate of 108,000 losses). Time Warner Cable could shed 105,000 customers, compared to Moffett's previous expectation of a 23,000-subscriber decline. Moffett's estimates for Cablevision were unchanged.
Moffett blamed increasing declines in the housing market - occupied housing units declined by 486,000 in the first quarter, the largest drop since 1994 - the continued weak economy, telco competition and normal seasonality associated with the second quarter.
With the exception of Cablevision, which has strong exposure to resort communities in New Jersey and Long Island, N.Y., cable operators typically are hit hardest by losses in the second quarter as subscriber disconnect service to move to their summer residences.