Do you want to know how bad it has been for cable stocks? So bad that even the apparent removal of one of the sector’s biggest albatrosses — the threat of net neutrality regulation — wasn’t enough to move the needle into positive territory as distributors, hampered by fears of slower broadband growth and stiffer competition, shed about 13% of their value in Q2.
Overall, cable distribution stocks — Comcast, Charter Communications, Altice USA and Cable One — saw their collective share prices fall 12.7% during Q2. The biggest loser was Altice USA, which fell 25.9% between March 31 and June 30, as fears of another quarter of broadband subscriber losses took hold. Other stocks didn’t fare much better — Comcast was down 15.7% in the quarter, closing at $39.24 per share on June 30, followed by Charter (down 14.1%) and Cable One (down 11.9%).
The stocks were down 48% for the first six months of the year, as a steep decline in Altice USA’s share value sunk the rest of the sector. Altice USA shares were down 42.8% for the first six months of 2022, followed by Charter (down 28.1%), Cable One (down 26.9%) and Comcast (down 21.2%).
| Company | Stock Price (March 31) | Stock Price (June 30) |
|---|---|---|
| Comcast | $46.56 | $39.24 |
| Charter | $545.52 | $468.53 |
| Altice USA | $12.48 | $9.25 |
| Cable One | $1,464.24 | $1,289.32 |
| AT&T | $17.85 | $20.96 |
| Verizon | $50.94 | $50.75 |
| T-Mobile | $128.35 | $134.54 |
| Dish Network | $31.65 | $17.93 |
| Disney | $137.16 | $94.40 |
| Fox Corp. | $39.45 | $32.16 |
| Warner Bros. Discovery | $24.92 | $13.42 |
| AMC Networks | $40.63 | $29.12 |
| Paramount Global | $37.81 | $24.68 |
(Source: Yahoo Finance)
A combination of fears that the slowdown in broadband subscriber growth will continue longer than originally expected, coupled with an overall market malaise (the S&P 500 entered into bear market territory in June), rising inflation and worries that the country may be headed into another economic recession all helped drive down stocks. For what it’s worth, every sector has had to weather some declines as the major indices have slipped over the past several months. The S&P is down 20% so far this year — its lowest point in more than 50 years -- while the Dow has slipped 15% and the NASDAQ Composite fell 30% in Q2.
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Content stocks fared no better. Warner Bros. Discovery, the new entity created through the merger of Discovery Inc. and AT&T’s WarnerMedia assets, fell the hardest, down 46.1% for the quarter and closing June 30 at $13.42 each. The Walt Disney Co., home of the Disney Plus streaming service, dipped nearly 31% during the period, followed by Paramount Global (down 34.7%), AMC Networks (down 28.3%) and Fox Corp. (down 18.5%). For the full year, Warner Bros. Discovery fell 43%, followed by Disney (down 39%), Paramount Global (down 18.2%), AMC Networks (down 15.4%) and Fox (down 12.3%).
Telcos Ride High
While cable distributors were feeling the pressure of slower broadband growth, telecom stocks like AT&T and T-Mobile rode high on speculation that their aggressive fiber buildout plans would continue to take share. AT&T stock was up 17% in Q2 to $20.96 on June 30, while T-Mobile rose 4.8% during the period. Verizon, which shook up cable shares late in June with a new pricing plan for unlimited broadband, was flat for the period.
Dish Network, which launched wireless service in Las Vegas in June, dipped 43.3% in Q2, closing at $17.93 per share on June 30.
It seemed like even good news couldn’t shift the gloomy sentiment around cable distributors stocks. Even a June 30 U.S. Supreme Court ruling that called into question a federal agency’s ability to regulate power plants, which could have the same effect on the Federal Communications Commission’s attempts to classify cable broadband as a Title II telecom service -- so-called Net Neutrality -- only lifted shares slightly.
The sector as a whole yawned on June 30, up 2% after the ruling. Shares rose only another 1% on July 1, after investors had a full day to absorb the significance of the ruling.
With Q2 earnings coming up in just a few weeks — Comcast is scheduled to report on July 28, followed by Charter on July 29 — investors will be looking closely at any deviations from the norm regarding broadband growth. Charter chief financial officer Jessica Fischer said at the Credit Suisse Communications conference June 15 that customers no longer qualifying for federal broadband discount programs could impact subscriber numbers by 60,000 to 70,000 homes. While Fischer said she still expects Charter to post positive broadband growth in Q2, it will likely be lower than what some analysts were expecting.
In a June 17 research note, Wells Fargo Securities media analyst Steven Cahall noted that just when investors feel the cable sell-off is over, “a new negative data point hits.”
“Valuations are near parity with Telco and that doesn't seem right to many given the structural advantages in broadband markets,” Cahall wrote, adding that Charter’s Q2 broadband commentary coupled with Verizon’s aggressive pricing suggest that the “estimate revision pain isn't over, and sentiment won't recover without some certainty around competition.” ￭
