Cable companies, such as Comcast and Charter, have long been solid investments as far as Wall Street was concerned. Now that all seems to be changing.
Yesterday MoffettNathan, an independent research firm that monitors the cable and satellite sectors, called for the downgrade of cable companies from buy to “neutral.” This is no minor change because these buy ratings can have a huge effect on stock prices and, in turn, companies.
“Broadband growth will inevitably slow, and it will likely do so at precisely the same time that video growth rates also come under pressure from OTT substitution,” Moffett said in his Tuesday-morning note. “And while cable operators have the pricing power to offset these headwinds via their broadband business, we believe it is likely that investors will (appropriately) apply a somewhat lower terminal growth rate assumption to a business that is achieving its growth through pricing rather than unit growth.”
Not only is Comcast and Charter at a neutral rating, but Cable One is now a recommended sell.
“After 10 years, it is getting harder to pretend that the market is somehow missing something,” Moffett added. “The market no longer views cable operators as contrarian investments. Their infrastructure advantage is well understood.”
Once again we are seeing the pressure of cord cutting on every aspect of the cable industry. The only question now is what happens next. Who is pushed out, and how do they respond?
Need cord cutting tech support? Join our new Cord Cutting Tech Support Facebook Group for help.