Evan Marriott
01-31-03, 02:38 PM
Cable Stocks Have Bright Near-Term Outlook -Prudential
By ELLEN SHENG
Of DOW JONES NEWSWIRES
NEW YORK -- The outlook for cable stocks is pretty bright for the next year and a half, said Katherine Styponias, a Prudential Securities analyst who initiated coverage of the sector with a market outperform rating Friday.
With cable network buildouts essentially done, cable companies should finally be cash-flow positive in 2003, she said. Moreover, recent price increases at satellite competitors DirecTV, a unit of Hughes Electronics Corp. (GMH), and EchoStar Communications Corp. (DISH) have made a price war much less likely, she said.
Another plus is the regulatory environment. Although some have recently predicted the reinstatement of cable rate regulations, Styponias doesn't think cable companies have anything to worry about. However, a shift in regulator focus could spell bad news for the industry, she said.
"We think regulators are also keenly aware that hurting the valuations of cable companies through rate re-regulation could potentially result in greater difficulty for cable companies to access the capital markets, potentially slowing deployment of broadband and telephony," she wrote.
Over the long term, cable companies need to be careful of increased price competition from satellite, she said. Rupert Murdoch, the head of News Corp. (NWS), "has made no secret of the fact that he covets a U.S satellite company, and he has a track record of being an aggressive competitor."
In the near-term, however, the cable industry has many attractive characteristics, "especially given the stock market and geopolitical uncertainty," Styponias wrote. Cable stocks are actually "defensive" these days, she said, meaning they are less likely to decline than some other stocks in a weak market. "Consumers consider 100+ channels a necessity, not a luxury," she said.
Of the group, Styponias' top picks are Comcast Corp. (CMCSK, CMCSA), Cablevision Systems Corp. (CVC) and Cox Communications Inc. (COX), all of which she assigned buy ratings.
Prudential said it knows of no material conflict of interest involving any of the companies mentioned in the analyst's report. Styponias owns no shares of the companies mentioned in her report.
Separately, UBS Warburg raised its rating on Cox Communications to buy from neutral Friday. Analyst Aryeh Bourkoff said he expects the company's fourth-quarter results will show continued strong growth. Cox is slated to report its results on Feb. 12.
-By Ellen Sheng, Dow Jones Newswires; 201-938-5863; ellen.sheng@dowjones.com
By ELLEN SHENG
Of DOW JONES NEWSWIRES
NEW YORK -- The outlook for cable stocks is pretty bright for the next year and a half, said Katherine Styponias, a Prudential Securities analyst who initiated coverage of the sector with a market outperform rating Friday.
With cable network buildouts essentially done, cable companies should finally be cash-flow positive in 2003, she said. Moreover, recent price increases at satellite competitors DirecTV, a unit of Hughes Electronics Corp. (GMH), and EchoStar Communications Corp. (DISH) have made a price war much less likely, she said.
Another plus is the regulatory environment. Although some have recently predicted the reinstatement of cable rate regulations, Styponias doesn't think cable companies have anything to worry about. However, a shift in regulator focus could spell bad news for the industry, she said.
"We think regulators are also keenly aware that hurting the valuations of cable companies through rate re-regulation could potentially result in greater difficulty for cable companies to access the capital markets, potentially slowing deployment of broadband and telephony," she wrote.
Over the long term, cable companies need to be careful of increased price competition from satellite, she said. Rupert Murdoch, the head of News Corp. (NWS), "has made no secret of the fact that he covets a U.S satellite company, and he has a track record of being an aggressive competitor."
In the near-term, however, the cable industry has many attractive characteristics, "especially given the stock market and geopolitical uncertainty," Styponias wrote. Cable stocks are actually "defensive" these days, she said, meaning they are less likely to decline than some other stocks in a weak market. "Consumers consider 100+ channels a necessity, not a luxury," she said.
Of the group, Styponias' top picks are Comcast Corp. (CMCSK, CMCSA), Cablevision Systems Corp. (CVC) and Cox Communications Inc. (COX), all of which she assigned buy ratings.
Prudential said it knows of no material conflict of interest involving any of the companies mentioned in the analyst's report. Styponias owns no shares of the companies mentioned in her report.
Separately, UBS Warburg raised its rating on Cox Communications to buy from neutral Friday. Analyst Aryeh Bourkoff said he expects the company's fourth-quarter results will show continued strong growth. Cox is slated to report its results on Feb. 12.
-By Ellen Sheng, Dow Jones Newswires; 201-938-5863; ellen.sheng@dowjones.com