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Cable One CABO provides data, video, and voice services in the United States. The company offers residential data services including Wi-Fi signal enhancements, digital video services with access to hundreds of channels, and a cloud-based DVR feature. Sparklight TV, its IPTV video service that enables customers to stream video from the cloud, is supported through devices such as Amazon Firestick, Apple TV, and Android-based smart televisions.
The Phoenix, Arizona-based company also provides its services to business customers including small to mid-markets, enterprises, and wholesale and carrier customers. Cable One serves over one million residential and business customers combined.
The Zacks Rundown
CABO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Cable Television industry group, which ranks in the bottom 11% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. Note how this group has widely underperformed over the past year:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be solid short candidates. While individual stocks have the ability to outperform even when included in a poorly performing industry group, the industry association serves as a headwind for any potential rallies and the journey forward is that much more difficult.
CABO has hit a series of 52-week lows this year and has failed to produce any meaningful rally, all while markets have recovered nicely. When a stock fails to rally while the general market is bullish, it’s telling us that buying pressure remains weak. The share price remains in a downtrend, and a recent uptick presents a compelling short opportunity.
Recent Earnings Misses & Deteriorating Outlook
CABO has fallen short of earnings estimates in each of the past four quarters. Back in May, the company reported first-quarter earnings of $9.62/share, missing the $14.40/share consensus EPS estimate by -33.19%.
CABO has posted a trailing four-quarter average earnings miss of -20.03%. Consistently falling short of earnings estimates is a recipe for underperformance, and Cable One is no exception.
The Zacks Rank #5 (Strong Sell) stock has been on the receiving end of negative earnings estimate revisions as of late. For the current year, analysts have decreased estimates by -13.92% in the past 60 days. The 2023 Zacks Consensus EPS Estimate is now $50.51/share, reflecting negative growth of -15.09% relative to last year.
Image Source: Zacks Investment Research