Much-maligned Cablevision Systems Corporation (CVC) is getting its act together, which is one reason I'm reiterating my buy rating for the company share's, first recommended on May 29, 2009 at a price of $19.03. If you bought CVC in May, you're up about 30%.Look for a 2-4% revenue increase for CVC in 2010, led by telecom subscriber increases, but weighed-down by below-trend cable TV subscriber growth.
Further, even ignoring the potential spin-off of sports arena Madison Square Garden, Cablevision's positives remain compelling, as it has the right assets for the digital age: fifth-largest cable TV. 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 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) subscribers.
The problem area, historically, for Cablevision has been customer service, but the company has taken steps to improve service with noticeable results. Provided that trend continues, CVC will have filled in one key piece in its value puzzle.
The First Call FY2009/FY2010 EPS estimates for CVC are $1.07 to $1.55. That $1.55 FY2010 EPS estimate will likely prove to be low.
Technically, Cablevision's stock chart is strong -- an uptrend, and a stock that continually stays above the key, 50-day moving average. Assuming Madison Square Garden is not spun-off in 2010, CVC will likely trade near $35 in 2010.
Stock Analysis: Cablevision Systems Corporation is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CVC now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your CVC position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $19.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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