On Thursday, JPMorgan adjusted its stance on Altice USA (NYSE:ATUS), shifting the cable operator's stock rating from Neutral to Underweight. The downgrade reflects concerns over the company's ongoing turnaround efforts and competitive challenges in the broadband market.
According to the investment firm, the decision to downgrade was influenced by several factors. Altice USA is currently facing a weak momentum in broadband (BB) services, which is expected to continue due to the intense competition from fiber and fixed wireless access (FWA) providers. The company's high leverage and limited cash flow generation add to the challenges, along with a low probability of an acquisition in the near future.
JPMorgan acknowledges the company's initiative to invest in sales capabilities and customer experience to boost broadband trends. However, they anticipate that it will take time for these efforts to reflect positively in the business's performance. In the meantime, the firm expects Altice USA to experience pressure on cash flow and leverage due to weak EBITDA, rising interest costs, and sustained high capital expenditures.
The investment firm also noted that Altice USA's stock is currently trading at a multiple of 7.4 times their projected 2024 enterprise value to EBITDA (EV/EBITDA), which is higher than that of its industry peers. This valuation is deemed unjustified by JPMorgan, given the outlined concerns and the competitive landscape.
InvestingPro Insights
With the backdrop of JPMorgan's downgrade of Altice USA, investors may find additional context through real-time data and insights from InvestingPro. The company's market capitalization stands at a moderate $1.07 billion, reflecting investor sentiment and market positioning. Despite challenges, analysts are forecasting a brighter horizon with net income expected to grow this year, which could signal a potential turnaround in profitability. This is supported by the company's positive performance over the last twelve months, as indicated by a P/E ratio of 7.09, suggesting a more favorable earnings outlook compared to the current market price.
However, challenges remain as Altice's short-term obligations exceed its liquid assets, presenting potential liquidity risks. Moreover, the company does not offer a dividend, which could influence investment decisions for income-focused shareholders. For a deeper analysis and more InvestingPro Tips, including a total of 5 additional insights, investors can visit InvestingPro's dedicated page for Altice USA. To enhance your investment strategy with InvestingPro's comprehensive tools, use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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