Cable One, Inc.

CABO Details

Cable One, Inc. (NYSE: CABO) is a leading broadband communications company dedicated to connecting consumers and communities to the things that matter most to them. As of March 31, 2022, the Company serves more than 1.1 million residential and corporate customers in 24 states through Sparklight® and the Cable One family. The Cable One family of brands offers a wide range of connection and entertainment services to residential consumers via its fibre-optic infrastructure, including Gigabit speeds, sophisticated WiFi, and video. The Company provides scalable, cost-effective solutions that enable organisations of all sizes to develop, compete, and flourish, ranging from small and mid-market to enterprise, wholesale, and carrier.

 Latest News:

• Key Management Changes: On April 12, 2022, CABO announced that Todd Koetje had been appointed as its next Chief Financial Officer by its Board of Directors. Koetje will take over as Chief Financial Officer from Steven Cochran on July 1, 2022. Cochran will remain as the Company's Chief Financial Officer until June 2022, then as a Senior Vice President until July 2022.
• Joint Venture Transaction: On January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber. The Company's approximately 58% investment in Clearwave Fiber was valued at USD 440.0 million as of the closing date.
• Share repurchase: The Company repurchased 47,800 shares of its common stock at an aggregate cost of USD 69.7 million during the first quarter of 2022.     

Q1FY22 Results:

• Double-Digit Growth in Topline: The company reported a YoY growth of 25.04% in revenues to USD 426.73 million in Q1FY22 (ended March 31, 2022) compared to USD 341.26 million in Q1FY21, driven by an increase of 14.8% in total customers and growth in Average revenue per user (ARPU) across all segments except Residential Voice.
• Surge in Net Income: CABO witnessed an increase in net income to USD 171.48 million in Q1FY22 vs. USD 68.58 million in Q1FY21. Net profit margin was 40.2% and Adjusted EBITDA margin was 53.1%.
• Healthy Balance Sheet: On March 31, 2022, the Company had USD 368.2 million of cash and cash equivalents on hand compared to USD 388.8 million at December 31, 2021. The Company’s debt balance was approximately USD 3.9 billion at both March 31, 2022, and December 31, 2021. The Company had USD 448.8 million available for borrowing under its revolving credit facility as of March 31, 2022.
• Dividend Highlights: The Company paid USD 16.7 million in dividends to stockholders and repurchased 47,800 shares of its common stock at an aggregate cost of USD 69.7 million during the first quarter of 2022.

Key Risk:

• Geographical Concentration: Most of CABO's consumers are the Mississippi Gulf Coast region and the greater Boise, Idaho area. As a result, any economic downturn in these sectors could harm the company's operations.
• Dependence on Third-Party Suppliers: CABO relies on a small number of third-party vendors and licensors for the technology and software needed to provide its services. Any breach of contract by these third parties could harm 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:

CABO' stock price has fallen 38.05% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 1,084.53 to USD 2,136.14. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 1,341.03.

Considering the significant correction in the stock price, industry above liquidity, strong margins, current valuation, and associated risks. We recommend a "Buy" rating on the stock at the current price of USD 1,115.515, down 1.04% as of May 09, 2022, 08:25 AM PDT.

Three-Year Technical Price Chart (as on May 09, 2022, at 08:25 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.