MoffettNathanson says things aren’t so bad for cable broadband

A new report entitled “U.S. Cable: What is Embedded in Valuations?” is optimistic about cable’s broadband prospects. Analysts at MoffettNathanson say they believe the market is undervaluing cable’s growth prospects. Moffett's analysis shows a big part of the stock drop can be traced to the current cost of capital, which is something that can change in the future and doesn’t go to the underlying prospects for cable’s broadband business. Cable is seeing new competition from all the fiber overbuilding, which is largely stemming from government programs such as the Rural Digital Opportunity Fund (RDOF) and Broadband Equity, Access, and Deployment (BEAD) Program. Yet cable operators could lose 50% of their subscribers in 20% of their footprint. This would amount to a loss of 10% of their total broadband subscribers over five years. But the remaining 80% of the incumbent cable operator’s footprint is either already fiber overlapped or is DSL only. In these areas, cable can expect to grow its subscriber base. They also point out that some of the fiber overbuild plans are probably overly optimistic, given the extreme shortages of labor and equipment. And not all fiber overbuild plans are competitive in cable’s footprint. However, other areas of cable companies' business must be taken into account as well such as business services, which are typically positive, and video, which is typically negative. But the net result is projected to be positive.