Cable stocks could be safe hiding places
Posted
Oct 29 2008, 02:04 PM
by
Kim Peterson
Rating:
Cable stocks are a good place to hide until the economy settles, said Bernstein analyst Craig Moffett today after taking a look at Comcast's results. "Where else do you expect to have a more stable set of cash flows?" he asked.
And that's exactly the message Comcast tried to convey today. Its results were solid, with profit up 38% as cable rates rose and spending was cut back. And Comcast said free cash flow would grow at least 20% this year.
Comcast has the money to sustain itself through the economic crisis, CEO Brian Roberts said. But not all of Comcast's news was good, which is probably why shares are down 5% today to $16.08.
Comcast is still adding customers, but the rate of growth has slowed and came in below analyst estimates. And the company won't go ahead with its planned share buyback this quarter in case it needs the money. Comcast is also seeing strong competition from AT&T's U-verse service.
BusinessWeek says Comcast's earnings show that the cable industry, proven to be recession-proof over the years, could be OK in the current downturn. People are starting to think of cable as a necessity, and not a discretionary luxury. And when you add Internet and phone to your cable package, the necessity factor multiplies.
As Roberts said in the conference call, Comcast's "connects" are lower than they were last year, but "disconnects" are not rising, even in these tough times.
"In facing the downturn, having sticky subscribers like that may prove to be the cable industry's biggest advantage of all," said BusinessWeek.
Related reading:
Cable continues to sucker us
AT&T goes after Comcast with digital TV service
How Verizon became the next Comcast
