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Analyst: Cable 'recession resistant'

By: Associated Press, Yahoo: Finance

NEW YORK (AP) -- While cable and satellite communications companies like DirecTV Group Inc. are more recession-resistant than ad-supported media, they are not recession proof, said Barclays analyst Vijay Jayant in a note to investors Tuesday.

He expects 2009 to be a "tough year" for the sector, as competition and promotional activity are both increasing, pressuring the companies' product margins and average revenue per user (the revenue they make per customer).

Jayant, who rates DirecTV "Overweight," expects it to continue to perform strongly in 2009, "reflecting strong competitive position and operating leverage in the business model."

Shares of El Segundo, Calif.-based DirecTV slipped 83 cents, or 3.7 percent, to $21.15 in afternoon trading as the broader market tumbled amid economic worries.

The analyst called satellite TV provider Dish Network Corp. his sector top pick given the stock's "attractive valuation and potential to outperform expectations."

Shares of Englewood, Colo.-based Dish fell 90 cents, or 7.3 percent, to $11.44. In the past 52 weeks, the stock has traded between $8.34 and $36.11.

Jayant kept an "Equal weight" rating on Cablevision Systems Corp., saying while the company has a "strong cable franchise," it but faces intensifying competition from Verizon Communications Inc.'s FiOS service. It is also "relatively more exposed" to the advertising market because it brings in a larger share of revenue from cable content assets than its rivals.

Shares of Bethpage, N.Y.-based Cablevision shed $1.25, or 7 percent, to $16.57. The stock has traded between $11 and $33 in the past year.

The analyst also kept an "Equal-weight" rating on Philadelphia-based cable company Comcast Corp. Jayant expects the company's revenue growth to slow down in 2009.

"While business appears recession-resistant, it is not recession-proof, and competitive pressures continue to increase," the analyst wrote, adding that even so, the company's subscription model is "relatively stable."

Comcast shares declined 89 cents, or 5.8 percent, to $14.42. The stock has lost a third of its value since hitting its 52-week peak of $22.86 in June.


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