Shares Rebound for Cablevision

Jan 10, 2005  •  Post A Comment

The dark cloud that has long loomed over Cablevision Systems appears to be lifting.

After nearly 18 months of negative headlines related to a 2003 accounting scandal at its cable channel AMC and a poorly received proposal by the company to launch a high-definition satellite television business, Cablevision shares over the past few weeks have staged a comeback and the company has once again won the affections of many on Wall Street.

Since Dec. 21 Cablevision shares have shot up about 18 percent to around $25 a share, after having spent months hovering in the high teens and low $20s. On top of that, a number of analysts have upgraded Cablevision’s stock, with CIBC World Markets just last Thursday assigning the tag “market performer” to the company’s shares, up from the previous rating of “market underperformer.”

The change of heart among investors and analysts is the direct result of the Bethpage, N.Y.-based company’s Dec. 21 announcement that it is tabling its planned spinoff of Rainbow Media Enterprises, the unit within Cablevision that houses the national cable channels, AMC, IFC and WE: Women’s Entertainment, along with Voom, Cablevision’s struggling high-definition satellite service. The company also said it was exploring “strategic alternatives” for Voom.

A Cablevision spokeswoman declined to comment beyond the Dec. 21 announcement.

That immediately sparked speculation that Cablevision is going to unload Voom and possibly the cable channels freeing it to focus on its core cable business, which is considered one of the strongest-performing operations in the industry.

“We believe [Cablevision] is now poised to trade based on fundamentals, and we think the near-term outlook is positive, with the company demonstrating significant momentum in subscriber growth since [the second quarter],” Credit Suisse First Boston analyst Bryan Craft wrote in a recent research note.

Ever since Cablevision first announced its plans to start a satellite-television operation, Wall Street has panned the proposal, and Cablevision’s shares traded accordingly. Critics complained that Voom was destined to stay an also-ran compared with more established players DirecTV Group and EchoStar Communications and fretted the venture would bleed cash.

But now that the spinoff plans are on the shelf, attention has turned to what might be next for Voom. Most analysts believe that Cablevision’s struggle to make the venture work will lead the company to sell the business. EchoStar is mentioned as a possible buyer, since the company is behind DirecTV in terms of the depth and breadth of its high-definition offering, though EchoStar officials have downplayed that speculation.