Accelerated Fiber Expansion Will Spark Premium Broadband Demand

Key Takeaways

• Accelerated fiber and AI-driven operational gains, along with innovative financing, are positioning the company for significantly stronger revenue and margin performance.
  
• Expansion into underpenetrated markets and rapid adoption of premium products are creating new high-margin revenue streams and enhancing long-term growth potential.
  
• Mounting competition, high debt, and shifting consumer preferences threaten Altice USA's revenue, profitability, and ability to invest in growth.

Catalysts

Provides broadband communications and video services under the Optimum brand in the United States, Canada, Puerto Rico, and the Virgin Islands.

• While analyst consensus expects fiber expansion to gradually drive growth, the pace and quality of Altice USA's fiber conversions and migrations-showing accelerating penetration, better churn profiles, and premium ARPUs-could dramatically outpace expectations and push both revenue and net margins higher as demand for ultra-fast connections surges.
  
• Analysts broadly agree on the positive margin impact from operational efficiencies, but Altice's deepening deployment of proprietary AI tools across sales, service, and network operations is already yielding faster reductions in service costs and staff requirements than anticipated, which may result in outsized improvements in operating leverage and net margin by 2026.
  
• Robust user growth in high-value underpenetrated segments-including households in MDUs and recently targeted suburban/rural locations-offers an addressable market expansion beyond consensus models; this, combined with diversified service offerings, will directly drive revenue growth and ARPU upside over the medium term.
  
• The rapid adoption of new premium add-on products such as Total Care tiers and Whole-Home Wi-Fi-with early penetration rates already surpassing typical industry new-launch trends-suggests recurring high-margin revenue streams that can measurably boost blended ARPU and earnings even in mature broadband markets.
  
• Altice USA's innovative capital-raising strategies, like the first-of-its-kind HFC asset-backed securitization, both lower its cost of capital sooner than analyst consensus expects and unlock funding for further strategic network expansion and technology investments, accelerating cash flow growth and improving long-term capital returns.

Altice USA Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Altice USA compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Altice USA's revenue will decrease by 1.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -3.1% today to 4.1% in 3 years time.
• The bullish analysts expect earnings to reach $340.5 million (and earnings per share of $0.75) by about August 2028, up from $-269.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.0x on those 2028 earnings, up from -4.1x today. This future PE is lower than the current PE for the US Media industry at 20.5x.
• Analysts expect the number of shares outstanding to grow by 1.52% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Altice USA Future Earnings Per Share Growth

Risks

• Ongoing cord-cutting and the accelerated migration to streaming continue to drive significant declines in Altice USA's traditional video subscriber base and residential ARPU, with management noting that lower video penetration contributed to a $3.74 per customer decline in video revenue year-over-year.
  
• Fiber overbuilders, fixed wireless access, and legacy telcos are intensifying competition in broadband, especially in the West and Northeast, raising customer acquisition costs and leading to persistent subscriber net losses that weigh on both revenue and adjusted EBITDA.
  
• The company's high leverage, signaled by a leverage ratio of 7.8 times annualized adjusted EBITDA and new asset-backed loans with interest rates as high as 8.875 percent, increases refinancing risk and constrains net earnings through higher interest expense, limiting the ability to invest in growth initiatives.
  
• Underinvestment relative to larger, vertically-integrated rivals puts Altice USA at a disadvantage, with the company being forced to focus on selective, surgical network upgrades while Comcast and Charter continue to outspend and offer bundled advantages, threatening future revenue growth and profit margins.
  
• Persistent demographic headwinds, such as younger generations shunning traditional cable and landline services, mean Altice USA's core customer base is structurally eroding, jeopardizing long-term revenue streams and margin stability.

Valuation

• The assumed bullish price target for Altice USA is $5.37, which represents two standard deviations above the consensus price target of $2.78. This valuation is based on what can be assumed as the expectations of Altice USA's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.5, and the most bearish reporting a price target of just $1.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $8.3 billion, earnings will come to $340.5 million, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 12.3%.
• Given the current share price of $2.34, the bullish analyst price target of $5.37 is 56.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.