On Friday, Wells Fargo adjusted its stance on Altice-USA (NYSE: ATUS) shares, shifting the rating from Equal Weight to Underweight and reducing the price target to $1.00 from the previous $2.00. The revision reflects ongoing challenges within the cable industry and anticipated pressures on the company's financial performance.
According to the latest industry note, the sector continues to face significant headwinds, with downward revisions in estimates and target prices. The analyst pointed out that fiber optic infrastructure builds in recent years are beginning to have a more pronounced impact just as the addition of fixed wireless access (FWA) subscribers slows down. Fiber is seen as a long-term threat to high-speed internet service providers (ISPs).
The forecast for Altice-USA's net additions has been adjusted, with expectations now set for a decrease of 28,000 in the first quarter of 2024, and further reductions in subsequent years. The previous estimates were a decrease of 25,000 for the first quarter of 2024, followed by 110,000 and 90,000 in the following years. The new projections anticipate declines of 28,000 for the first quarter of 2024, and 143,000 for the full year, with no change to the 90,000 estimated for 2025.
The Wells Fargo report also casts doubt on the company's ability to deleverage, given the prediction of low single-digit percentage declines in adjusted EBITDA annually. Furthermore, it is noted that free cash flow (FCF) remains negligible and that Altice-USA's investment in expanding its fiber network has decelerated, which could pose additional challenges to the company's financial health.
InvestingPro Insights
Enhancing the analysis of Altice-USA's (NYSE: ATUS) financial outlook, recent data from InvestingPro provides additional context to the Wells Fargo report. Notably, Altice-USA is expected to see net income growth this year, a positive signal for potential investors. This aligns with analysts' predictions that the company will turn a profit within the year, despite the competitive pressures in the cable industry. However, it's important to note that Altice-USA's short-term obligations currently exceed its liquid assets, which could impact its financial agility in the near term.
From an investment standpoint, Altice-USA has not been distributing dividends, which might influence the decision-making process for income-focused investors. For those considering a deeper dive into the company's financials and future prospects, InvestingPro offers additional insights. There are PRONEWS24 more InvestingPro Tips available, including a detailed analysis of the company's profitability over the last twelve months. These metrics and insights could prove invaluable in assessing whether Altice-USA's current valuation and future outlook align with your investment strategy.
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