Altice USA ( NYSE: ATUS ) is up 2.4% Friday afternoon, tacking on to sharp gains it made midday Thursday following a report that it's exploring a sale of Suddenlink that could bring up to $20B .
The prospect of such a sale (and the debt relief it could bring Altice USA) sent the stock more than 22% higher on Thursday. While the stock has a market cap of $5.1B, it reports over $33B in assets - and a little more than that in liabilities, with more than $25.5B of that in long-term debt .
New Street Research has upgraded Altice USA ( ATUS ) to Buy, saying such a deal has been part of chatter and is "reasonably likely." But even after Thursday's 20% gain, "the probability-weighted upside is compelling enough for us to upgrade the stock," analyst Jonathan Chaplin and team said.
A $20B sale would suggest a multiple of 14x EBITDA of $1.4B, "which seems high ... but not impossible," New Street says. The firm says the median multiple for fiber and cable deals over the past few years has been 14x; that Suddenlink is a "good asset" in markets with limited competition, and is underpenetrated; and that any cash buyer would see tax benefits besides.
It's set a new price target of $15, implying another 30% upside ahead.
BofA meanwhile is switching to "No Rating" on Altice USA ( ATUS ), saying the shares are no longer trading on their fundamentals. It sees a potential 15x EV/EBITDA multiple on the deal as a "significant disparity" from public multiples which would be difficult for the company to capture.
The most likely strategic public buyer would be Charter ( CHTR ), analyst Jessica Reif Ehrlich suggests, but even that deal is "very unlikely" as Charter likely wouldn't pay that premium, she says - pointing more toward a buyer in private equity.
European cableco Altice made its entry into the U.S. market with a 2015 deal to buy the country's seventh-largest cable company for about $9B .
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Altice USA gains again, as analysts debate what Suddenlink sale could draw