On Thursday, KeyBanc made an adjustment to Cable One's (NYSE:CABO) financial outlook. The firm's analyst reduced the price target on the company's stock to $881 from the previous $900. Despite this change, the analyst maintained an Overweight rating on Cable One shares.
The rationale behind the adjustment stems from the belief that Cable One has significant room to expand its Broadband subscriber base, given its current 35% residential penetration compared to its peers, who average over 40%.
The analyst anticipates that Cable One could increase its market penetration to match that of its peers. However, the growth in subscribers might lead to a decrease in the average revenue per user (ARPU), presenting near-term risks.
The analyst also noted that despite challenges in the macroeconomic and competitive landscape, Cable One is expected to grow its Broadband subscriber count. This optimism is partly due to the company's limited exposure to the Affordable Connectivity Program (ACP). Additionally, Cable One is projected to have lower capital intensity, which should contribute to free cash flow (FCF) growth.
In the report, estimates for Cable One's expenses in the first quarter were adjusted based on information disclosed in the company's 10-K filing. For the year 2024, the analyst has revised Broadband subscriber estimates solely based on the perspective towards ACP.
The new price target of $881 is approximately 8 times KeyBanc's adjusted EBITDA expectation for the year 2025, excluding items. This valuation marks a decrease from the historical average of 11.6 times, reflecting the revised estimates.
InvestingPro Insights
As Cable One (NYSE:CABO) navigates through a dynamic market environment, real-time data from InvestingPro offers a snapshot of the company's financial health. The company's market capitalization currently stands at $2.4 billion, with a P/E ratio of 9.02, suggesting a valuation that may be attractive to investors seeking companies with earnings at a reasonable price.
Moreover, the P/E ratio adjusted for the last twelve months as of Q4 2023 is slightly lower at 8.86, potentially highlighting an even more appealing valuation in the near term.
InvestingPro Tips highlight Cable One's strong track record of dividend growth, with the company raising its dividend for 9 consecutive years and maintaining dividend payments for 10 consecutive years.
This consistency in rewarding shareholders, coupled with the fact that the company's liquid assets exceed its short-term obligations, may offer a sense of security for income-focused investors. Still, it is worth noting that 2 analysts have revised their earnings expectations downwards for the upcoming period, which should be considered when evaluating the company's future performance.
For readers interested in a deeper analysis, InvestingPro provides additional tips on Cable One. To explore these insights and leverage the full suite of tools on the platform, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 10 more InvestingPro Tips available for Cable One, which could further inform investment decisions.
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