Company Reports

Altice USA continues to show improvement in an environment where growth has slowed and fixed-wireless broadband continues to take incremental market share, though at a slower pace. Similar to its cable peers, we’ve trimmed our growth expectations for Altice, particularly around the small business market, reducing our fair value estimate to $7 from $9. We suspect Altice has opportunities to improve its financial position and deliver value for shareholders, but it remains in a challenging situation that creates very high uncertainty. We continue to caution investors that the firm’s extremely high debt load leaves little room for error and that small changes in our assumptions can yield big swings in our fair value estimate.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market and faces the broader incursion of fixed-wireless players into the broadband business. The firm has also taken a different approach to the business in recent years than other cable operators, with lackluster results. A new management team, largely hailing from Comcast, has slowly been improving the firm's performance. We expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term. However, Altice USA also carries a very large debt load, leaving it little room for error.

Altice USA's fourth-quarter results again showed incremental improvement, but the challenging broadband competitive environment offset some of these gains. After adjusting our model, we have trimmed our fair value estimate to $9 from $13. We like Altice's assets and believe the firm can steadily improve its operating performance in the coming years. But we continue to caution investors that its extremely high debt load leaves little room for error. Small changes in our assumptions can yield big swings in our fair value estimate. The firm's recent debt refinancing activity has pushed its next major maturity out to 2027, but at a high cost that raises the bar Altice must clear to deliver value for shareholders.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market and faces the broader incursion of fixed-wireless players into the home broadband business. The firm has also taken a different approach to the business in recent years than other cable operators, with lackluster results. A new management team, largely hailing from Comcast, has slowly been improving the firm's performance. We expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term. However, Altice USA also carries a very large debt load, leaving it little room for error.

Altice USA took another small step forward during the third quarter. Customer trends are showing gradual improvement as the new management team implements new marketing and customer service tactics. While the stock remains deeply undervalued against our $13 fair value estimate, we remain cautious, as our Very High Morningstar Uncertainty Rating reflects. For investors who share our view that valuations among U.S. cable stocks are attractive, we think Altice could augment a core position in Comcast for those willing to take on additional risk in exchange for upside potential.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market. It has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term.

Altice USA’s second quarter provided glimmers of hope, but the firm remains far from healthy. While shares remain deeply undervalued relative to our $13 fair value estimate, our Very High Morningstar Uncertainty Rating reflects Altice USA’s very large debt load. The firm will likely need several quarters to stabilize its customer base before it can begin growing revenue again. An unexpected increase in competitive intensity before it reaches that stabilization point could be difficult to overcome.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market. It has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term.

The next 12 months will go a long way toward determining Altice USA’s fate. We are lowering our fair value estimate to $13 per share from $19 on expectations for weaker broadband pricing and margins. We still believe Altice USA owns an attractive set of assets, but its equity value is tiny relative to its debt load, making this a highly volatile investment.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market. It has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term.

Altice USA showed some improvement during the fourth quarter but still posted a generally weak end to a difficult 2022. New CEO Dennis Mathew used the earnings release to signal significant changes ahead, appointing four new senior executives (three of whom hail from Comcast, Mathew’s former employer) and sharply curtailing the firm’s fiber expansion plans. We don’t expect to significantly change our $19 fair value estimate, but we reiterate that Altice’s equity value is tiny relative to its debt load, making this a highly volatile investment.

Altice USA has struggled to maintain revenue growth recently--more than cable peers Comcast and Charter--as it battles stiff competition from Verizon in the New York market. The firm has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow growing, cash flow over the long term.

Altice USA continued to struggle during the third quarter, reporting poor customer losses, weak revenue per customer, and soft margins. On the brighter side, the firm’s network upgrade effort has accelerated nicely, and management indicated that it has seen signs of a turnaround thus far during the fourth quarter. New CEO Dennis Mathew stated he’s taking a hard look at marketing, pricing, and customer service. We suspect his operating experience at Comcast will serve Altice well, but the stock’s investment prospects will likely be tied to M&A decisions in the near term. Former CEO and current chairman Dexter Goei indicated that the board is very close to a decision on the sale of all or part of the former Suddenlink territory, which accounts for about 30% of revenue, and is potentially interested in taking the firm private.

Altice USA has struggled to maintain revenue growth recently--more than cable peers Comcast and Charter--as it battles stiff competition from Verizon in the New York market. The firm has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow growing, cash flow over the long term.

Altice USA reported another difficult quarter, but confirmed that its has entered discussions to sell off all or part of the former Suddenlink territory, which accounts for about 30% of revenue. At the same time, the firm continues to move forward with its fiber network buildout, covering nearly 30% of its non-Suddenlink territory. Management indicated that the rationale for an asset sale could include a longer time horizon, a lower cost of capital, or more patience among private investors than the public markets have afforded Altice. Given our view that cable stock valuations are unreasonably low currently, we agree with this sentiment, though private or strategic buyers undoubtedly would also like to take advantage of those valuations. However, a sale could allow Altice USA to significantly reduce balance sheet risk. We’re leaving our fair value estimate at $28 for now.

Altice USA has struggled to maintain revenue growth recently--more than cable peers Comcast and Charter--as it battles stiff competition from Verizon in the New York market. The firm has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow growing, cash flow over the long term.

Altice USA showed glimmers of a rebound during the first quarter, but the firm still faces a long road ahead. We aren’t changing our $28 fair value estimate for now, though we expect the stock to remain highly volatile thanks to a heavy debt load, an ambitious investment strategy, and a management team that hasn’t executed well recently.

Altice USA has struggled to maintain revenue growth recently--more than cable peers Comcast and Charter--as it battles stiff competition from Verizon in the New York market. The firm has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow growing, cash flow over the long term.

Altice USA has struggled to maintain revenue growth recently--more than cable peers Comcast and Charter--as it battles stiff competition from Verizon in the New York market. The firm has broken from its peers with plans to aggressively upgrade its networks with fiber rather than rely on traditional cable network technology. This strategy will sharply curtail free cash flow over the next few years. Still, we expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow growing, cash flow over the long term.

Altice USA continues to flesh out its strategy as it slowly works to rebuild momentum. The firm lost 13,000 net residential customers during the fourth quarter, about half as many as the prior quarter and roughly equal to a year ago. While Altice’s larger cable peers Comcast and Charter are still adding customers, only Altice posted an improving trend to end the year. Changing service plans, new promotional offers, and increased marketing to better compete against Verizon FiOS have helped win business but also dented revenue growth during the quarter.