2 thoughts on “Time to Buy Cable Stocks?”

  1. I think the cash flow metric is misleading – you really need to look at free cash flow and take into account cap ex – which is still enormous for these companies. Especially ones that are still rolling out DVRs and the like. I’m doing this off the top of my head, but I believe Comcast, for instance, is going to do about $2B in free cash flow, and has an Enterprise Value of around $80B – so really about 2.5% (I may have some of these figures slightly wrong – feel free to correct!)

    So, you’ve got a bunch of companies with large amounts of debt, high cap ex, balance sheet downside, flat subscriber growth, higher marketing costs, intense competition from satellite companies – seems like a lot of bad news. Add to that Comcast’s attempt at Disney which many people interpreted as showing that growth was a problem, and that while everyone is excited about VOIP, that is may or may not prove to be a big business with wireline generally losing lines every month. Oh, and VOD and other digital services have yet to be a big business as well. The market just hates that kind of uncertainy.

    Even given all that, I think these companies may be good long term holdings – I just wouldn’t be getting in now.

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