Collins Stewart Starts Cablevision (CVC) at Buy; Comcast (CMCSA) and Time Warner Cable (TWC) at Hold

July 1, 2008 11:52 AM EDT

Collins Stewart is out with a research note this morning considering the impacts of the current challenging economic environment on U.S. cable TV operators. The firm believes cable operators such as Cablevision (NYSE: CVC), Comcast (Nasdaq: CMCSA) and Time Warner Cable (NYSE: TWC) could:

• lose more than 500,000 basic video subscribers due to satellite’s higher number of HD channels and the RBOC expanded rollout of its TV service. At the same time, the firm sees the February '09 switch to digital as possibly moving 1-2 million over-the-air viewers to cable in the beginning of '09,
  
• halt a market share slide in the Broadband market segment, and report a flat 53% share due to expanded offers, and
  
• repeat the 6% market share gains from '07 in the Telephone segment.

Collins Stewart starts Cablevision at Buy, with a $34 price target. The firm believes Cablevision will see the highest FY08 and FY09 FCF growth among the U.S. cable operators, despite recent questionable acquisitions and competition from Verizon (NYSE: VZ). Further, the firm believes Cablevision could announce another restructuring, which would boost shares. The firm said its price target on Cablevision is based on a discounted cash flow model which uses a 2.5% growth rate and a 10% weighted average cost of capital.

Collins Stewart starts Comcast at Hold. The firm believes that Comcast will disappoint investors on its Q2 and Q3 basic subscriber losses and higher FY09 CapEx, keeping the stock trading relatively flat through the rest of '08.

Collins Stewart starts Time Warner Cable at Hold. While the firm expects Time Warner Cable to nearly meet its FY08 guidance, Collins Stewart sees the shares trading flat due to: 1. the longstanding multiples correlation with Comcast and 2. the wait and see attitude investors may take
until the separation from TWX occurs.

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