RBC Downgrades Comcast, Charter On Cable Concerns

Cord cutters and the changing way Americans watch TV programming are spurring RBC Capital Markets to downgrade the nation’s two most dominant cable companies.

The Analysts

RBC’s Steven Cahall downgraded Comcast Corporation CMCSA from Outperform to Sector Perform and lowered his price target from $45 to $42.

RBC’s Kutgun Maral lowered Charter Communications Inc CHTR from Outperform to Sector Perform, while lowering the price target from $400 to $375.

The Thesis

The analysts are citing dropping subscriber numbers that don’t have as much to do with the individual companies as their overall business.

“We are taking a more cautious view on cable sector fundamentals and see potential negative sector catalysts weighing on sentiment as we move through 2019,” Maral wrote in a note to investors.

RBC highlighted concerns about the sustainability of earnings growth in the sector when it's tied to cable connectivity, which is dropping.

While getting more cautious, RBC isn’t cutting the cord completely on the cable companies. Maral noted Charter has had good execution and “strong balance sheets that position it well in a potential downturn.”

Similarly, Cahall argues Comcast is likely to outperform most of the cable market in a recession with connectivity that’s more resilient than many competitors.