Remote Work And Streaming Will Spur Fiber Expansion

Key Takeaways

• Strategic investments in innovative broadband products and rural fiber infrastructure are fueling revenue growth, subscriber gains, and long-term competitive strength.
  
• Redirected capital from dividend suspension strengthens finances, supports debt reduction, and enables greater investment in high-return, growth-focused projects.
  
• Cord-cutting, competition, and costly infrastructure upgrades are eroding Cable One’s margins, limiting growth, weakening pricing power, and reducing returns to shareholders.

Catalysts

Provides data, video, and voice services in the United States.

• Product innovation through offerings like FlexConnect and Internet Lift strategically targets and monetizes the growing market of value-seeking and underserved broadband customers, enabling Cable One to capture incremental revenue and ARPU as more households shift from traditional pay-TV to broadband-only solutions.
  
• Aggressive expansion and better allocation of capital into rural fiber infrastructure directly positions Cable One to benefit from the secular increase in high-speed internet demand as remote work, streaming, gaming, and IoT fuel ongoing bandwidth consumption, driving long-term top-line growth and competitive pricing power.
  
• Sophisticated customer acquisition and retention initiatives, including AI-driven churn modeling, are resulting in historically low churn rates and improving net subscriber additions, which creates a more solid base for future revenue growth and operational leverage as the company scales.
  
• Suspension of the dividend, redirected toward accelerated debt repayment and organic growth investments, enhances balance sheet strength and frees over two hundred million dollars in discretionary cash flow over three years, improving future earnings through lower interest expense and supporting capital deployment into high-return projects.
  
• Successful monetization of strategic investments in regional broadband businesses and continued pursuit of M&A synergies enable diversification, network scale, and recurring revenue streams, sustaining EBITDA margin improvement and long-term free cash flow expansion.

Cable One Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Cable One compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Cable One's revenue will decrease by 3.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1.3% today to 23.4% in 3 years time.
• The bullish analysts expect earnings to reach $325.7 million (and earnings per share of $50.47) by about July 2028, up from $-20.3 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 9.5x on those 2028 earnings, up from -41.7x today. This future PE is lower than the current PE for the US Media industry at 20.2x.
• Analysts expect the number of shares outstanding to grow by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.6%, as per the Simply Wall St company report.

Cable One Future Earnings Per Share Growth

Risks

• Accelerating cord-cutting continues to erode Cable One’s legacy video business, as evidenced by a 15.8 percent year-over-year decline in residential video revenues, which further shrinks high-margin revenue streams and places lasting pressure on overall company earnings and margins.
  
• Stagnant or declining rural populations limit Cable One’s subscriber growth potential, constraining new customer acquisition and capping organic revenue growth in the rural and small-town markets that the company heavily relies upon.
  
• The widespread expansion of high-speed fiber overbuilders and fixed wireless access providers, along with near-universal mobile broadband competition in most of Cable One’s footprint, threatens to disrupt market share and requires significant capital expenditures, undermining competitive positioning and dampening future free cash flow generation.
  
• Ongoing capital intensity is compounded by the need to upgrade legacy coaxial infrastructure to fiber in order to compete, as seen by higher capital expenditures and a suspended dividend to redirect cash toward debt repayment and network investment, ultimately suppressing net margins, return on invested capital and discretionary shareholder returns.
  
• The industry-wide move toward direct-to-consumer streaming platforms, regulatory headwinds on pricing and data caps, and shrinking video subscriber bases collectively reduce Cable One’s pricing power, compress average revenue per user and present long-term risk to both revenues and earnings growth.

Valuation

• The assumed bullish price target for Cable One is $444.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Cable One'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 $444.0, and the most bearish reporting a price target of just $137.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $325.7 million, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 11.6%.
• Given the current share price of $150.0, the bullish analyst price target of $444.0 is 66.2% 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.