Altice USA, Inc.

ATUS Details

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

Latest News:

• Partnership with Ampersand: On January 18, 2022, Ampersand, the audience-first TV ad sales and technology business, announced a multi-faceted relationship with ATUS. Ampersand will become the exclusive seller of Altice's national Addressable inventory and integrate aggregated set-top box data insights from two million ATUS’ households into its AND Platform for both local and national Addressable TV planning, buying, and measurement, with a commitment to protecting personal information. AND, a multiscreen TV planning, buying, and measurement platform that debuted at the start of 2020 is the industry's single largest supplier of linear and streaming TV inventory. The AND Platform gives marketers access to 80 million households, 52 million addressable (more than 70% of all U.S. households).

9MFY21 Results:

• Slight Increase in Sales: The company reported slight growth of 2.86% in revenues to USD 7.57 billion in 9MFY21 (ended September 30, 2021) from USD 7.36 billion in 9MFY20.
• Surge in Net Income: ATUS recorded a sharp uptick in net income to USD 750.22 million in 9MFY21 vs. USD 107.21 million in 9MFY20.
• Leveraged Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents of USD 232.45 million and total debt of USD 26.77 billion.
• Improvement in ARPU: The company witnessed an improvement in Average Revenue Per User (ARPU) to USD 140.73 as of September 30, 2021, from USD 138.16 as of September 30, 2020.

Key Risks:

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

Outlook:

Updated Financial Outlook (Source : Q3FY21 Earnings Presentation, November 04, 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM 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' share price has declined 60.67% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 12.87 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 18.01.

Considering the significant correction in the stock price in the past nine months, collaboration with ampersand, strong profitability margins, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 14.74, up 0.68% as of February 08, 2022, 03:13 PM ET.

Three-Year Technical Price Chart (as on February 08, 2022, at 03:13 PM ET). 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.