Pali Research Upgrades Time Warner Cable (TWC) to Neutral; Superior Capital Allocation to Comcast

October 20, 2009 9:19 AM EDT

Pali Research upgrades Time Warner Cable (NYSE: TWC) from Sell to Neutral.

Pali analyst says, "While we believe Time Warner will try to grow its cable subscriber base in 2010/2011 (Charter is set to emerge from bankruptcy before year-end), Time Warner Cable is attracting significant capital inflows from Comcast (Nasdaq: CMCSK) investors who fear (correctly, given what Comcast is trying to do now with NBCU) the company will squander its free cash flow. Time Warner Cable is telling investors exactly what they want to hear – no acquisitions with free cash flow going toward debt reduction leading to meaningful multiple expansion."

"Lack of Clear Wireless Strategy. Beyond the impact of wireless substitution on voice net additions, we continue to believe a robust wireless data offering from the RBOCs (such as Verizon’s LTE (NYSE: VZ)) will have a meaningful impact on data additions. In turn, we believe TWC will need to address its lack of a wireless strategy beyond simply relying on Clearwire; that being said, LTE is not a 2010 event and we do not see a near-term catalyst to focus their attention on this issue."

To see more analyst ratings on TWC Click Here.

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