We came across a long thesis on Cable One Inc (NYSE:CABO) on ValueInvestorsClub by Fletch. In this article we will summarize the bulls’ thesis on CABO. The company’s shares were trading at $346.33 when this thesis was published, vs. closing price of $373.32 on Jan 3rd.
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Cable One Inc (NYSE:CABO) is a telecommunications company that derives revenue from the provision of broadband, voice, and video services to residential and business customers. From a product perspective, the majority of revenue is sourced from data and video services, which are subscription-based. The company also offers TV services and derives advertising revenue from selling airtime on its video channels.
The bull thesis is focused on a potential reversal in the story after 2 years of decline in both revenues and EBITDA due to intensifying competitive pressures. The author argues that CABO will turn the ship and start growing again – the first factor favoring this thesis is the upcoming “leveling of the playground”, which means that competitors that previously disrupted CABO will soon face headwinds from the ending of the promotion period for clients. Second, the author believes that the company’s earlier reduction in Average Revenue Per User (ARPU) is projected to stabilize in 2H 2024 and begin to grow again in 2025, primarily due to vanishing of the disruption effect from fixed wireless access providers, that usually quickly capture market share but face capacity constraints in the long-term.
Finally, with interest rates being lowered and forecasts for a few more rate cuts coming, the likelihood of housing starts and move activity accelerating (both are tailwinds for CABO revenue growth) increases. The author claims that the aforementioned catalysts could drive the stock to $700.00 per share, which implies an 88% upside from the current market price.
While we acknowledge the potential of CABO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CABO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.