Cable stocks, coming off an unprecedented first-half run, have begun to show signs of slowing down, with growth at the top MSOs just 4.6% between June 30 and Sept. 30.
Programmers, meanwhile, have ridden recent carriage wins to stock gains that more than double that pace.
The four publicly traded MSOs as a whole rose 4.6% for the three months between June 30 and Sept. 30, compared to a 14.7% rise in the second quarter.
While the stocks are still ahead of last year by a wide margin — the entire sector was up by 37% in the first nine months of the year — the acquisitions frenzy that drove increases in the first six months of 2013 is beginning to wear off.
Pivotal Research Group principal and senior media and communications analyst Jeff Wlodarczak said the M&A bloom might be wilting. But it could come back with a roar if Charter Communications rekindles a desire for Time Warner Cable.
M&A HOPES STILL HIGH
Added MoffettNathanson LLC principal and senior analyst Craig Moffett: “The fact that the cable stocks have mostly held onto their M&A-fueled gains means that investors still have high hopes that deals will be consummated.”
Charter touched off the M&A frenzy in June when it made overtures to TWC, which were rejected. Since then, Charter officials have said that consolidation would help solve one of the biggest concerns in the distribution business: rising programming costs.
But after a 17.1% run-up in the second quarter, TWC lost some ground in Q3, closing on Sept. 30 at $111.60, down 1% from $112.48 on June 28.
The stock is up nearly 15% for the year on deal speculation, but could see some additional pressure in the next few weeks. Analysts expect TWC third-quarter financial results, slated to be released on Oct. 31, to be worse than forecast earlier.
TWC has already said that subscriber losses spiked during the month-long blackout of CBS broadcast programming in top markets New York, Los Angeles and Dallas between Aug. 2 and Sept. 2.
Even Charter stock, which has soared ever since John Malone’s Liberty Media invested $2.6 billion for a 27% stake in March, has seen growth slow as days continue to pass with no concrete deal in sight.
Charter’s stock price was up 8.8% in the third quarter, to $134.76 from $123.85. That lagged behind the 18.8% pace of the second quarter and the 77% gain for the first nine months of the year.
Cablevision Systems was up strongly in the second quarter, when deal speculation was high. But it rose just 2 cents in the third quarter, to $16.84 each on Sept. 30.
Among MSOs, Comcast appeared the steadiest, rising 8.1% for the third quarter, about half its 21% pace for the first six months of the year.
“In the end it’s going to be about good results — especially in data — and capital return,” Wlodarczak said.
For programmers, it appeared to be another story. On the whole, the group was up 10.8% in the third quarter, led by big gains at Starz (27.3%); Viacom (22.9%); Twenty-First Century Fox (16.5%); Time Warner Inc. (13.8%) and CBS (12.9%).
Their fortunes seemed to turn in the calendar third quarter as the stocks rose at twice the pace of the previous period, when they were up by just 5.3%.
AD FEARS ALLAYED
The resurgent ad market and recent carriage deals that appear to show that programmers are reaping rewards from their negotiations point to continued growth ahead for the networks.
Cable stocks are cooling off as the deal speculation rampant earlier this year wanes.