In this market, it pays to hedge growth with safety, and if one can accomplish this in one play, so much the better. Cablevision Systems (NYSE: CVC) offers that opportunity. Cablevision's compelling positives: fifth-largest cable television operator (about 10.4 million revenue generating units), with a strong presence in a lucrative market (New York City area, 3.1 million cable TV subscribers); included in that latter total are about 2.8 million premium cable TV subscribers, called iO Digital; nearly 2.5 million high-speed internet subscribers; and 1.9 million internet voice (telephone) customers.
Analysts also like Cablevision's plan to spin-off its Madison Square Garden indoor sports/event arena, its well-structured debt, and cash position.
Further, the U.S. government's mandated shift to digital television also represents a positive tailwind for CVC's cable TV division: basic cable subscribers must rent a new digital converter box, which amounts to a de facto 10-15% monthly fee increase, or risk losing reception of numerous cable channels. The First Call F2009/F2010 EPS estimates for CVC are 97 cents/$1.38.
The risks include increased competition from telecom TV and satellite TV providers and a U.S. recession lingering into F2010, but the balance is still tipped in favor of a Buy for this revenue stream-rich business model.
Stock Analysis: Cablevision is a moderate-risk stock. Consider buying a 25% position in CVC now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CVC position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $8.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
5-30-2009 @ 11:48AM
GeorgeG said...
Well, obviously these supposed "analysts" don't to get their cable and internet from Cablevision or read the news about the Dolan family (controlling interest of Cablevision). If they did they would know that Cablevision is a VERY UNPREDICTABLE COMPANY that makes profits by taking advantage of its customers who are more or less forced to use their services.
While other businesses are attempting to lower the cost to their customers to help us all get through the economic downturn, Cablevision has taken this downturn as a new opportunity to jack up their rates while removing popular channels from their lineup to force people into buying more expensive packages.
Cablevision has repeatedly been in the news lately for outrageously bad customer service. For example, one story discussed how the company forced a family to pay hundreds for a new cable box because it got burned up when their house burned down! Other stories have discussed their forcing customers to pay hundreds for channels and services they never ordered or received.
I think cablevision will be in trouble so long as the unpredictable Dolan family is in charge. They have been leading their companies astray for a long time. I don't have the time to get started on all of their shenanigans.
6-01-2009 @ 12:13AM
tjp386 said...
GeorgeG seems to be reading my mind here...like eerily well actually.
Risky stock? How bout "don't buy" if you expect NYC consumers to wake up and realize they're getting robbed by the Dolan family?