Cable Stocks All About Broadband, New Household Formation Key, Moffett Says

Broadband drives cable stock valuations, and new household formation is critical to growth in an increasingly saturated market, MoffettNathanson analyst Craig Moffett told investors Thursday. "As goes broadband, so goes the cable industry," he said. "There’s probably no more than 5 or 6 percent of the equity value -- or, in fact, the enterprise value -- of the cable stocks that we cover accounted for by their video businesses." The rest "is their broadband businesses, writ large," he added. Since 2008, Moffett said, cable has relentlessly taken wireline broadband market share, and despite telco network upgrades, "there’s still about 70 percent of the country where cable has an emphatically better technology than what it competes against.” He said it's "striking how little efficacy" telco price discounts had in spurring broadband gains. With "wired plus satellite" broadband reaching 80 percent penetration of occupied households, the industry growth rate slowed "because there just aren’t as many homes left to penetrate," and the remaining ones "are harder to penetrate," because they have mostly elderly and low-income residents. But “the growth rate of broadband has meaningfully accelerated in the last three quarters," he said. "All of that is attributable to an acceleration in new household formation."