Tuesday, MoffettNathanson changed its stance on Cable One (NYSE:CABO), upgrading the stock from Neutral to Buy, despite significantly lowering the price target to $615 from $835. The firm acknowledges the challenges Cable One faces, particularly regarding the company's approach to broadband pricing, which is its primary growth driver. The analyst noted that forgoing growth in broadband average revenue per user (ARPU) could halt the company's overall growth.
The report also highlights Cable One's lack of a wireless strategy, suggesting that this could lead to a lower terminal multiple in valuation. However, this absence in the wireless sector might make Cable One a more appealing acquisition target. Additionally, the firm considered the potential costs associated with the upcoming 2025 mandatory buy-in (MBI) in its analysis.
Despite these headwinds, MoffettNathanson believes that Cable One's current valuation is too low, considering the attractiveness of its assets. This has led to the decision to upgrade the stock rating. The firm emphasizes that Cable One's valuation and asset appeal are compelling reasons for the stock to not remain at its current price level.
The analyst's report includes a detailed analysis that factors in the various challenges and potential costs that Cable One may encounter. It is this comprehensive evaluation that supports the firm's decision to recommend Cable One as a Buy, even with a significantly reduced price target.
Cable One's prospects, in the view of MoffettNathanson, justify the upgraded rating despite the reduced target price.
InvestingPro Insights
In light of MoffettNathanson's recent upgrade of Cable One (NYSE:CABO) to Buy, it's pertinent to consider additional financial metrics and insights that could influence investor decisions. According to InvestingPro data, Cable One's market capitalization stands at $2.5 billion, with a compelling low P/E ratio of 9.25 for the last twelve months as of Q4 2023, suggesting that the stock may be undervalued relative to its earnings. The company's PEG ratio during the same period is 0.5, indicating potential for growth when juxtaposed against its earnings growth rate.
From a shareholder's perspective, two InvestingPro Tips shed light on Cable One's financial practices. The company has not only raised its dividend for 9 consecutive years but has also maintained dividend payments for 10 consecutive years. This consistency in rewarding shareholders is coupled with a dividend yield of 2.65% as of the latest data, pointing to a stable income stream for investors. Moreover, Cable One's liquid assets exceed its short-term obligations, providing a cushion for operational flexibility and financial security.
While some analysts have revised their earnings downwards for the upcoming period, it's important to note that Cable One has been profitable over the last twelve months, and analysts predict the company will continue to be profitable this year. For investors seeking additional perspective, there are more InvestingPro Tips available, providing a deeper dive into Cable One's financial health and future outlook. To access these insights and enhance your investment strategy, visit https://www.investing.com/pro/CABO and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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