Altice USA, Inc.

ATUS Details

Altice USA, Inc. (NYSE: ATUS) is a broadband communications and television services provider established in the United States. Its operations can be divided into two categories 1) Optimum, which primarily serves the New York metro area, and 2) Suddenlink, which primarily serves the south-central United States. It serves 9.3 million residential and commercial users with internet, television, telephony, and mobile services.

Latest News:

• Achieving Key Milestones: On May 3, 2022, ATUS subsidiary Lightpath, an all-fibre, infrastructure-based connectivity provider, stated that it had surpassed the milestone of 2,000 connected wireless towers. This achievement comes after Lightpath more than doubled the number of on-net wireless sites last year, including landing its first wireless customer in the Greater Boston area. Carriers continue to opt for Lightpath as they densify their 5G site deployments in anticipation of tomorrow's new 5G applications.

Q1FY22 Results:

• Slight Decrease in Sales: The company reported slight decline of 2.30% in revenues to USD 2.42 billion in Q1FY22 (ended March 31, 2022) from USD 2.48 billion in Q1FY21, attributable to 3.57% YoY decline in Business services and wholesale.
• Drop in Net Income: ATUS recorded a reduction in net income to USD 196.55 million in Q1FY22 vs. USD 274.14 million in Q1FY21.
• Leveraged Balance Sheet: As of March 31, 2022, the company had cash and cash equivalents of USD 195.65 million and total debt of USD 26.44 billion.
• Contraction in ARPU: The company witnessed an reduction in Average Revenue Per User (ARPU) to USD 137.92 as of March 31, 2022, from USD 137.79 as of December 31, 2021.

Key Risk:

• Supplier Concentration Risk: ATUS buys set-top boxes and other customer premise equipment from a small number of vendors since its cable systems use one or two unique technology designs. Breach of contract by a vendor could jeopardise the company's operations.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

ATUS's stock price has fallen 69.37% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 10.47 to USD 38.19. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 11.54.

Considering the significant correction in the stock price, achieving key milestones, strong margins, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the current price of USD 9.235, down 2.89% as of May 03, 2022, at 07:39 AM PDT.

Three-Year Technical Price Chart (as on May 03, 2022, at 07:39 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.