JP Morgan Cuts Cable One Price Forecast Amid Fearing Fiber Competition, Challenges In Broadband Growth

In a recent update, JP Morgan analyst Sebastiano C Petti lowered his price forecast for Cable One, Inc. (CABO) from $420 to $325, maintaining a Neutral rating. The analyst's concerns revolve around the growing fiber competition and ongoing fixed wireless access (FWA) challenges, which are expected to constrain the company's broadband subscriber growth and limit long-term market penetration. With roughly 10% of Cable One's footprint now facing new fiber competition and fiber build-out accelerating, it remains to be seen if the company's latest market strategy can positively impact broadband subscriber growth.

For 2025, Petti estimates broadband net adds of +5k, down from +14k, and lower EBITDA 3% to $820 million due to lower broadband revenue and rising costs. Notably, the analyst anticipates the company's EBITDA decline rate to improve in 2025 as broadband revenues stabilize, led by improved average revenue per user (ARPU) and selling, general & administrative (SG&A) savings. However, Petti expects the company's new go-to-market strategy and emphasis on increasing gross adds will lead to a slight rise in SG&A expenses in 2025.

The analyst sees total revenue of $1.540 billion (down 0.8%) and margins of 53.2% (-80bps year over year) for 2025. Last month, the company reported fourth-quarter GAAP EPS of $(18.71), which includes a fair value adjustment and non-cash impairment, while sales of $387.21 million missed the estimate of $389.56 million. Price Action: CABO shares are down 2.03% at $254.91 at the last check Monday.



Cable One's new go-to-market strategy and emphasis on increasing gross adds are expected to lead to a slight rise in selling, general & administrative (SG&A) expenses in the short term. This increase in expenses is likely to impact the company's short-term profitability. However, the long-term effects of this strategy on SG&A expenses are not explicitly stated in the provided information. As the company focuses on growing its customer base, investors should monitor the balance between increased expenses and potential revenue growth.

In conclusion, the growing fiber competition and FWA challenges pose significant threats to Cable One's long-term market penetration and subscriber growth. While the company's new go-to-market strategy and emphasis on increasing gross adds may lead to short-term increases in SG&A expenses, the long-term success of these initiatives remains to be seen. Investors should closely monitor Cable One's financial performance and strategic initiatives to assess the potential impact on the company's stock price and market position.