Cablevision shares climb further on upgrades
NEW YORK (Reuters) - Shares in Cablevision Systems Corp (CVC.N) rose 6 percent on Friday as several Wall Street analysts upgraded the New York cable operator on its strong cash flow prospects and the possibility of asset sales.
Cablevision shares have risen 14 percent since Thursday, when management said on an earnings conference call that it is actively seeking options that could include a special one-time dividend, a large share buyback or a spin-off of cable network unit Rainbow Networks.
Analysts at Citigroup and Pali Research both upgraded the stock to 'buy' while Kaufman Bros raised its price target to
$28.
Analysts were impressed with Cablevision's strong cash flow prospects and its ability to fend off competition for video subscribers from Verizon Communications Inc's (VZ.N) FiOS TV.
The cable company's free cash flow from continuing operations grew to $250 million during the second quarter as its capital expenditure fell.
Citi analyst Jason Bazinet said he now expects Cablevision to generate $2.6 billion in untaxed free cash flow between 2008 and 2010. "This is materially higher than our prior forecast of just $1.1 billion over the same period," he wrote in a note to clients.
Bazinet also said the raised free cash flow forecast means that Cablevision could afford to buy back as much as 35 percent of its equity in three years, "paving the away for superior equity returns."
Richard Greenfield at Pali Research said Cablevision's management will be considering a "substantial buyback and/or a separation/sale of Rainbow."
Greenfield said Cablevision's controlling Dolan family is no longer looking at major acquisitions and is focused on current assets. "This strategic shift combined with far better than expected results, which drive a notable increase in our full year cash flow expectations result in our rating increase to 'buy'" with a $32 target price."
Cablevision shares rose by $1.40 to $25.68 in early afternoon trading on the New York Stock Exchange.
(Reporting by Yinka Adegoke, editing by Phil Berlowitz)
