We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Industry Outlook Highlights Rogers Communication, Liberty Global and Cable One
Read MoreHide Full Article
For Immediate Release
Chicago, IL – October 1, 2024 – Today, Zacks Equity Research discusses Rogers Communication (RCI - Free Report) , Liberty Global (LBTYA - Free Report) and Cable One (CABO - Free Report) .
The Zacks Cable Television industry players are focusing on bundled offerings and on-demand programming to counter challenges from cord-cutting as consumers shift away from traditional pay-TV options, including cable TV and satellite TV, to over-the-top streaming services with innovative content. The industry is evolving by leveraging its broadband infrastructure to meet changing consumer preferences and balancing traditional cable services with new streaming options to maintain relevance in the rapidly changing media landscape.
Cable companies are benefiting from consistent demand for high-speed broadband and WiFi devices, driven by hybrid work and learning environments. Increased media consumption has been a key catalyst for industry leaders like Rogers Communication, Liberty Global and Cable One.
Industry Description
The Zacks Cable Television industry comprises companies offering integrated data, video, and voice services, including pay-TV and Internet-based streaming content. These firms provide equipment like satellite dishes, digital set-top receivers and remote controls.
Cable companies typically build or lease network backbones from telecom companies and purchase licenses to distribute programmers' content over these networks. They license content from programmers and sell advertising spots.
The industry is capital-intensive, requiring significant investment in infrastructure, and is heavily regulated by the Federal Communications Commission. Industry players must balance the need for ongoing investment in technology and infrastructure with evolving consumer preferences and regulatory compliance to maintain competitiveness in the media landscape.
4 Trends Shaping the Future of the Cable Industry
Skinny Bundles, Original Content Driving Growth: Cable television's ability to generate ad revenues outside traditional TV platforms, such as websites and any digitally-consumed platform, provides increased scope for target-based advertising. Nevertheless, consumers' unfavorable disposition, particularly toward advertising, has hit industry participants hard.
Further, the growing consumer preference for digital and subscription services instead of linear pay-TV and rental or outright purchase has compelled industry players to alter their business models. Cable television companies are now offering a variety of alternative packages, including skinny bundles, which are delivered at lower costs than traditional offerings. These companies are also innovating in terms of original content to be competitive against streaming service providers.
High-Speed Internet Demand Key Catalyst: The growing demand for high-speed Internet, including broadband, has aided cable television industry participants like Comcast and Charter. Improving Internet speed is fueling the demand for high-quality video and the trend of binge viewing. Further, a strengthening broadband ecosystem in international markets, along with the proliferation of smart TVs, is anticipated to drive growth. Also, the work-from-home trend and online learning have boosted Internet usage, thus supporting industry participants.
Cord Cutting and Matured PayTV Industry Hurting Prospects: The cable television industry is witnessing the rapid evolution of distribution platforms as well as embracing new players and advanced technologies. Declining profits of residential video services due to rising programming costs and retransmission fees have made survival difficult for traditional companies.
Additionally, the heightened need for on-demand content has led to the mushrooming of streaming service providers, making it particularly tricky for traditional cable television companies to maintain a viewer base. Furthermore, the traditional pay-TV industry is maturing with widespread consolidation. Moreover, residential voice service revenues are declining due to the rising shift to wireless voice services.
Softness in Advertising Demand Impeding Business Growth: Persistent inflation and higher interest rates are having a detrimental effect on ad spending. Besides, the challenge with TV ads is that marketers have difficulty getting actionable metrics and insights such as attribution data. At this time, marketers must look for outside-the-box solutions to extract conversion data from offline media. TV has taken a secondary role in most marketing strategies due to the growing influence of digital marketing.
Many marketers are increasing ad spending on digital mediums due to their unmatched ability to deliver personalized messages that are easy to measure. Cable TV players are set to face competition for ad dollars from streaming service providers like Netflix and Disney, which are raising prices and introducing cheaper ad-supported packages now that their subscriber growth has slowed.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Cable Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #75, which places it in the top 30% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Cable Television industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year.
The industry has declined 8.7% over this period against the broader sector's increase of 19%. The S&P 500 has risen 33.5% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, a commonly used multiple for valuing cable companies, we see that the industry is currently trading at 7.06X compared with the S&P 500's 19.28X and the sector's 8.04X.
Over the past five years, the industry has traded as high as 15.39X, as low as 6.48X and at the median of 9.79X.
3 Cable Stocks in Focus
Rogers Communication: This Zacks Rank #3 (Hold) company continues to benefit from mobile phone and Internet subscriber additions. The company's investments in the 5G spectrum and partnerships with leading real estate companies to support 5G infrastructure deployment are catalysts. Rogers has expanded its 5G network to more than 2,407 communities, which is expected to be a key growth driver in the long haul. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Further, the acquisition of Shaw Communications is expected to expand its user base. Rogers will expand its market share from a predominantly eastern Canada focus into the sparsely populated regions of Western Canada on the back of Shaw's wireline, or cable and Internet, business. Within five years, Rogers looks to invest at least $2.5 billion to enhance and expand 5G coverage in Western Canada and at least $3 billion in additional network, services and technology investments.
Shares of the company have declined 14% in the year-to-date period. The consensus mark for 2024 earnings has moved south by 0.6% to $3.57 per share in the past 30 days.
Liberty Global: This international provider of video, broadband Internet, fixed-line telephony, mobile and other communications services is benefiting from increasing Internet speed and an expanded mobile subscriber base. Increasing demand for higher Internet speed in the U.K. has been a key catalyst. The company's focus on offering higher-value bundles is expected to drive the top line.
Liberty Global is also benefiting from the acquisition of Sunrise Communications in Switzerland. Moreover, the company's non-consolidated joint venture —Virgin Media O2 — is contributing to the top line. Last month, Virgin Media O2 announced the launch of a new mobile plan to help people on low incomes stay connected. The O2 Essential Plan is available for all customers and comes with 10GB of mobile data along with unlimited calls and texts for £10 per month.
Shares of this Zacks Rank #3 company have gained 19.6% in the year-to-date period. The Zacks Consensus Estimate for Liberty Global's 2024 loss has remained steady at 61 cents per share in 30 days' time.
Cable One: This Zacks Rank #3 company is benefiting from strength in demand for both residential and business broadband offerings. The quality of its network allows CABO to deploy faster residential Internet speeds than most of its competitors. It has ample unused network capacity, providing a runway for increases in data consumption over time.
Through Sparklight and the associated Cable One family of brands, the company serves more than 1.1 million residential and business customers in 24 states. The demand for higher speed tiers remains robust, with the sale of 500 megabits or higher at nearly 65% and gig sales at an all-time high of nearly 40%. CABO has developed a unique device configuration using DOCSIS 3.1 that has created 20% to 30% more capacity upstream than previously available on traditional low-split hybrid fiber coax plants.
Shares of the company have declined 36.5% in the year-to-date period. The Zacks Consensus Estimate for CABO's 2024 earnings has remained steady at $30.99 per share in 30 days' time.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights Rogers Communication, Liberty Global and Cable One
For Immediate Release
Chicago, IL – October 1, 2024 – Today, Zacks Equity Research discusses Rogers Communication (RCI - Free Report) , Liberty Global (LBTYA - Free Report) and Cable One (CABO - Free Report) .
Industry: Cable Television
Link: https://www.zacks.com/commentary/2343422/3-stocks-to-watch-from-a-prospering-cable-television-industry
The Zacks Cable Television industry players are focusing on bundled offerings and on-demand programming to counter challenges from cord-cutting as consumers shift away from traditional pay-TV options, including cable TV and satellite TV, to over-the-top streaming services with innovative content. The industry is evolving by leveraging its broadband infrastructure to meet changing consumer preferences and balancing traditional cable services with new streaming options to maintain relevance in the rapidly changing media landscape.
Cable companies are benefiting from consistent demand for high-speed broadband and WiFi devices, driven by hybrid work and learning environments. Increased media consumption has been a key catalyst for industry leaders like Rogers Communication, Liberty Global and Cable One.
Industry Description
The Zacks Cable Television industry comprises companies offering integrated data, video, and voice services, including pay-TV and Internet-based streaming content. These firms provide equipment like satellite dishes, digital set-top receivers and remote controls.
Cable companies typically build or lease network backbones from telecom companies and purchase licenses to distribute programmers' content over these networks. They license content from programmers and sell advertising spots.
The industry is capital-intensive, requiring significant investment in infrastructure, and is heavily regulated by the Federal Communications Commission. Industry players must balance the need for ongoing investment in technology and infrastructure with evolving consumer preferences and regulatory compliance to maintain competitiveness in the media landscape.
4 Trends Shaping the Future of the Cable Industry
Skinny Bundles, Original Content Driving Growth: Cable television's ability to generate ad revenues outside traditional TV platforms, such as websites and any digitally-consumed platform, provides increased scope for target-based advertising. Nevertheless, consumers' unfavorable disposition, particularly toward advertising, has hit industry participants hard.
Further, the growing consumer preference for digital and subscription services instead of linear pay-TV and rental or outright purchase has compelled industry players to alter their business models. Cable television companies are now offering a variety of alternative packages, including skinny bundles, which are delivered at lower costs than traditional offerings. These companies are also innovating in terms of original content to be competitive against streaming service providers.
High-Speed Internet Demand Key Catalyst: The growing demand for high-speed Internet, including broadband, has aided cable television industry participants like Comcast and Charter. Improving Internet speed is fueling the demand for high-quality video and the trend of binge viewing. Further, a strengthening broadband ecosystem in international markets, along with the proliferation of smart TVs, is anticipated to drive growth. Also, the work-from-home trend and online learning have boosted Internet usage, thus supporting industry participants.
Cord Cutting and Matured PayTV Industry Hurting Prospects: The cable television industry is witnessing the rapid evolution of distribution platforms as well as embracing new players and advanced technologies. Declining profits of residential video services due to rising programming costs and retransmission fees have made survival difficult for traditional companies.
Additionally, the heightened need for on-demand content has led to the mushrooming of streaming service providers, making it particularly tricky for traditional cable television companies to maintain a viewer base. Furthermore, the traditional pay-TV industry is maturing with widespread consolidation. Moreover, residential voice service revenues are declining due to the rising shift to wireless voice services.
Softness in Advertising Demand Impeding Business Growth: Persistent inflation and higher interest rates are having a detrimental effect on ad spending. Besides, the challenge with TV ads is that marketers have difficulty getting actionable metrics and insights such as attribution data. At this time, marketers must look for outside-the-box solutions to extract conversion data from offline media. TV has taken a secondary role in most marketing strategies due to the growing influence of digital marketing.
Many marketers are increasing ad spending on digital mediums due to their unmatched ability to deliver personalized messages that are easy to measure. Cable TV players are set to face competition for ad dollars from streaming service providers like Netflix and Disney, which are raising prices and introducing cheaper ad-supported packages now that their subscriber growth has slowed.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Cable Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #75, which places it in the top 30% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Cable Television industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year.
The industry has declined 8.7% over this period against the broader sector's increase of 19%. The S&P 500 has risen 33.5% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, a commonly used multiple for valuing cable companies, we see that the industry is currently trading at 7.06X compared with the S&P 500's 19.28X and the sector's 8.04X.
Over the past five years, the industry has traded as high as 15.39X, as low as 6.48X and at the median of 9.79X.
3 Cable Stocks in Focus
Rogers Communication: This Zacks Rank #3 (Hold) company continues to benefit from mobile phone and Internet subscriber additions. The company's investments in the 5G spectrum and partnerships with leading real estate companies to support 5G infrastructure deployment are catalysts. Rogers has expanded its 5G network to more than 2,407 communities, which is expected to be a key growth driver in the long haul. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Further, the acquisition of Shaw Communications is expected to expand its user base. Rogers will expand its market share from a predominantly eastern Canada focus into the sparsely populated regions of Western Canada on the back of Shaw's wireline, or cable and Internet, business. Within five years, Rogers looks to invest at least $2.5 billion to enhance and expand 5G coverage in Western Canada and at least $3 billion in additional network, services and technology investments.
Shares of the company have declined 14% in the year-to-date period. The consensus mark for 2024 earnings has moved south by 0.6% to $3.57 per share in the past 30 days.
Liberty Global: This international provider of video, broadband Internet, fixed-line telephony, mobile and other communications services is benefiting from increasing Internet speed and an expanded mobile subscriber base. Increasing demand for higher Internet speed in the U.K. has been a key catalyst. The company's focus on offering higher-value bundles is expected to drive the top line.
Liberty Global is also benefiting from the acquisition of Sunrise Communications in Switzerland. Moreover, the company's non-consolidated joint venture —Virgin Media O2 — is contributing to the top line. Last month, Virgin Media O2 announced the launch of a new mobile plan to help people on low incomes stay connected. The O2 Essential Plan is available for all customers and comes with 10GB of mobile data along with unlimited calls and texts for £10 per month.
Shares of this Zacks Rank #3 company have gained 19.6% in the year-to-date period. The Zacks Consensus Estimate for Liberty Global's 2024 loss has remained steady at 61 cents per share in 30 days' time.
Cable One: This Zacks Rank #3 company is benefiting from strength in demand for both residential and business broadband offerings. The quality of its network allows CABO to deploy faster residential Internet speeds than most of its competitors. It has ample unused network capacity, providing a runway for increases in data consumption over time.
Through Sparklight and the associated Cable One family of brands, the company serves more than 1.1 million residential and business customers in 24 states. The demand for higher speed tiers remains robust, with the sale of 500 megabits or higher at nearly 65% and gig sales at an all-time high of nearly 40%. CABO has developed a unique device configuration using DOCSIS 3.1 that has created 20% to 30% more capacity upstream than previously available on traditional low-split hybrid fiber coax plants.
Shares of the company have declined 36.5% in the year-to-date period. The Zacks Consensus Estimate for CABO's 2024 earnings has remained steady at $30.99 per share in 30 days' time.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.