According to Multichannel News, the leading source of information about the cable television and satellite television industry, it was a good year to invest in cable TV and satellite TV stocks. Barring a precipitous fall in the last week of the year, cable stocks across the board have had their best year since 2009, with MSOs up 41%, programmers up 38%, and satellite TV providers up 23%.
Here is some more information from the Multichannel News report:
Stocks of the four publicly traded MSOs — Cablevision Systems, Charter Communications, Comcast and Time Warner Cable — rose a combined 41% between Dec. 30, 2011 and Dec. 18, 2012. Comcast led the pack, with an increase of 60.5%. The other MSOs also enjoyed healthy increases: Time Warner Cable rose 51.4%, Charter was up 30.2% and Cablevision grew nearly 6%.
For the operators, it was a combination of strong performance (basic-video subscriber losses declined sharply at Comcast) and renewed optimism in the cable model.
Pivotal Research Group principal and media and communications analyst Jeff Wlodarczak said he attributes the bulk of the MSO gains this year on misplaced perceptions late in 2011 that cable operators had hit a growth wall.
“Instead, they have continued to take quite significant share in data, video subscriber losses have moderated, the telcos have mostly backed off expanding into new markets with video [and] the worries about over-the-top [players] have moderated significantly,” Wlodarczak said. He noted that operators also have returned capital to shareholders fairly aggressively and the outlook is for continued cash-flow growth.
Cable operators also managed to beat back competitive threats from telcos, satellite and so-called over-the-top providers such as Netflix.
Comcast reduced its basic-customer losses by 40% in 2011 and was on track to reduce those losses by at least another 25% in 2012. While most analysts anticipate that the cable sector will continue to lose customers as a whole in 2013, ISI Group media analysts Vijay Jayant and David Joyce expect that Comcast may cross into positive territory in the fourth quarter of 2012 and the first quarter of 2013.
“It’s important to highlight that fundamentals have been improving for the core business for the cable companies,” Joyce said in an interview. “Yes, broadband continues to take share, but also in this mature pay TV market in the U.S., satellite and telcos are starting to experience the same sort of seasonality that cable has been experiencing for a while.”
On the programming side, a renewed optimism regarding the advertising market and the overall economy, with a little M&A speculation sprinkled in, has helped push up shares in the sector by nearly 38% so far this year, led by Discovery Communications. Discovery, which has reported consistent high single-digit domestic advertising revenue growth for the first nine months of the year, saw its stock rise 55.3% ($22.64 each) to $63.61 on Dec. 18, from $40.97 on Dec. 30, 2011.
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