Altice USA, Inc.

ATUS Details

Altice USA, Inc. (NYSE: ATUS) is a United States-based broadband communications and television services company. Its operations can be divided into two categories. 1) Optimum, which primarily covers the New York metro area, and 2) Suddenlink, primarily serves markets in the United States' south-central region. It provides internet, television, telephony, and mobile services to 9.3 million residential and commercial customers.

Latest News:

• Expansion of MVNO Agreement: On March 24, 2022, T-Mobile and Altice USA extended their multi-year MVNO deal, with T-Mobile serving as the nationwide network for Altice USA's Optimum Mobile service. Both corporations will benefit from the new agreement's terms. The arrangement allows Optimum Mobile to provide greater flexibility and value to our consumers and deliver a 360-degree seamless connectivity experience at home and on the go when combined with our Optimum and Suddenlink broadband service.

FY21 Results:

• Slight Increase in Sales: The company reported slight growth of 1.98% in revenues to USD 10.09 billion in FY21 (ended December 31, 2021) from USD 9.89 billion in FY20, attributable to 9.04% YoY growth in Business services and wholesale.
• Surge in Net Income: ATUS recorded a sharp uptick in net income to USD 988.18 million in FY21 vs. USD 448.54 million in FY20.
• Leveraged Balance Sheet: As of December 31, 2021, the company had cash and cash equivalents of USD 195.71 million and total debt of USD 26.55 billion.
• Improvement in ARPU: The company witnessed an improvement in Average Revenue Per User (ARPU) to USD 137.79 as of December 31, 2021, from USD 140.09 as of December 31, 2020.

Key Risk:

• Supplier Concentration Risk: Because ATUS' cable systems use one or two unique technology designs, it buys set-top boxes and other customer premise equipment from a restricted number of providers. Vendor breaches of contract could put the company's operations in jeopardy.

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 64.40% 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 15.43.

Considering the significant correction in the stock price, surge in bottom line, inorganic growth initiatives, strong margins, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing market price of USD 12.09, up 3.16% as of April 13, 2022.

Three-Year Technical Price Chart (April 13, 2022). 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.