Pali Research Upgrades Cablevision (CVC) to Neutral

May 9, 2008 10:34 AM EDT

Pali Research upgrades Cablevision (NYSE: CVC) from Sell to Neutral while dismissing its $20 price target.

The firm believes Cablevision's strong Q1 results "illustrate the power of its incredibly high video, data and voice penetration levels to reduce churn, and mitigate marketing cost increases, despite rising competition." In addition to a Newsday acquisition that is continually sounding less likely, Pali also likes that Cablevision's live entertainment venue spending will probably be less immediate due to MSG Entertainment's newly launched third-party arena tour business.

Interestingly, Pali brings to attention "the Dolan discount", which sets a slightly more pessimistic tone to the Cablevision story due to the company's family ownership and management. The firm believes that the Dolan's "appear to have little or no interest in paying a dividend or buying back stock" at Cablevision and instead "continue to emphasize their desire to focus on growth strategies – which we essentially view as the Dolans investing in “passion� projects rather than driving Cablevision shareholder value."

Considering the Dolan discount, Pali notes that acquisition risk at Cablevision is turning out to be increasingly significant.

Cablevision Systems Corporation operates as a cable operator in the United States. [BCS]

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