Wireless/broadband convergence ‘becoming destructive to all’ – KeyBanc

By Senad Karaahmetovic

KeyBanc analysts made a series of rating moves in the broker’s research of Communication Services stocks.

Overall, they advise KeyBanc’s clients to avoid Cable and Wireless names altogether “as convergence between Wireless/Broadband is becoming destructive to all.” Between the two, the analysts see a better near-term setup in Cable stocks due to de-risked estimates, improving macro and data points, and valuation.

“With the majority of valuations on an EV/ EBITDA basis between 5-8x, we’re favoring inexpensive, lower leverage,” they wrote in a client note.

Along these lines, the analysts upgraded NBC owner Comcast (NASDAQ:) and WideOpenWest (NYSE:) to Overweight while downgrading Charter Communications (NASDAQ:) to Sector Weight.

“CMCSA theme park investment in EPIC Universe with completion in 2025 should continue to support strong Theme Park growth, while capital intensity should move lower in 2024 and further in 2025, supporting FCF growth, and allowing CMCSA to return capital to shareholders. With only 2.5x leverage, we like the balance sheet position. We see >15% upside to our PT of $44 with share purchases adding ~6% and dividend adding ~3% for a total return of ~25%,” they said.

The analysts reiterated T-Mobile US (NASDAQ:) as the best-positioned wireless stock.