Altice USA, Inc.

ATUS Details

Altice USA, Inc. (NYSE: ATUS) is a broadband communications and television services provider headquartered in the United States. Its operations are classified into two types. 1) Optimum, which serves the New York metro area, and 2) Suddenlink, which serves markets in the south-central United States primarily. It serves ~9.3 million home and commercial users with internet, television, telephony, and mobile services.

Latest News:

• Geographical Expansion: On February 28, 2022, ATUS subsidiary, Lightpath, an all-fibre, infrastructure-based connectivity provider, had announced the opening of a new Boston office to support rapid growth in the Massachusetts market. Lightpath continues to invest in the Massachusetts market with a new office at 100 Quannapowitt Parkway in Wakefield, capitalising on the region's strong demand and growth. The office will house sales and support personnel with additional operational facilities throughout the state.
• Acceleration In Fiber Deployment Strategy: On February 16, 2022, ATUS  announced an acceleration of its fibre deployment strategy across its Optimum and Suddenlink footprints over the next four years to reach 6.5 million passings by the end of 2025. This new Suddenlink fibre expansion, combined with Optimum's continuous fibre build, will position the Company to pass more than two-thirds of its entire footprint with 100 percent fibre broadband over the next four years, including approximately 2.5 million fibre passings at Suddenlink and 4 million fibre passings at Optimum.

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: 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.

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 66.81% 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 14.00.

Considering the significant correction in the stock price, significant improvement in bottom line, inorganic growth initiatives, strong margins, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 11.535, up 0.87% as of March 18, 2022, at 02:39 PM ET.

Three-Year Technical Price Chart (as on March 18, 2022, at 02:39 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.