ATUS - KeyBanc's cable look cuts Charter boosts Comcast and WideOpenWest

2023-04-04 11:55:22 ET

Charter Communications ( NASDAQ: CHTR ) slipped 3.6% Tuesday morning, and smaller cableco WideOpenWest ( NYSE: WOW ) rose 1.1% , as KeyBanc shuffled its industry ratings after catching up with the companies following a wave of first-quarter conferences.

KeyBanc downgraded Charter ( CHTR ) to Sector Weight, while upgrading WideOpenWest ( WOW ) and Comcast ( NASDAQ: CMCSA ) to Overweight. Comcast ( CMCSA ) was down 1% Tuesday morning as well.

The bank is downbeat on cable broadband subscriber additions for Q1, as analyst Brandon Nispel says he's expecting negative growth for Comcast ( CMCSA ), WideOpenWest ( WOW ) and Altice USA ( ATUS ) -- figuring fixed wireless access will take about 100% of the share of net adds. Commentary from Charter and Comcast point to moderate net adds and a modest net loss respectively, he noted.

Fixed wireless isn't rampaging either, though: Data suggests that T-Mobile ( TMUS ) downloads were down from last quarter and Verizon ( VZ ) may have improved modestly, pointing to a possible peak in the burgeoning market.

And the main competitor to mainly cable may be backing down: Fiber-to-the-home builds from Lumen ( LUMN ), Frontier ( FYBR ) and AT&T ( T ) "appear to no longer be accelerating," Nispel said.

While subscriber growth will be weak in cable, profitability growth should be "fine," and so KeyBanc upgraded Comcast and WideOpenWest on company-specific catalysts.

As for wireless, "the world keeps getting bigger, somehow, but at a slowing rate, while cable takes share," Nispel said. T-Mobile ( TMUS ) and AT&T ( T ) should see healthy postpaid phone sub growth, with Verizon ( VZ ) being the "main share donor" of the three.

"For those concerned that Cable is losing market share in Broadband to Wireless, Cable's market share in Wireless is higher than Wireless' market share in Broadband," Nispel said.

T-Mobile ( TMUS ) looks best positioned, and AT&T ( T ) is still attractive for yield seekers, but KeyBanc believes "CMCSA provides the best total return potential in large cap."

He has a $44 price target on Comcast ( CMCSA ), implying 17% upside. Nispel's target of $14 on WideOpenWest ( WOW ) implies 34% upside.

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