Cable One Inc (CABO)

Cable One Inc. Stock Overview - November 2023

Company Profile

History and Background

Cable One Inc. (CABO) is a broadband communications company founded in 1995 with headquarters in Phoenix, Arizona. It began as a small cable provider in Yuma, Arizona, and has since grown through acquisitions and organic expansion. Today, they operate in 24 states with over 750,000 cable and internet subscribers.

Core Business Areas

Cable One's primary business revolves around providing:

• High-speed internet: They offer fiber-optic and coaxial network-based services to residential and commercial customers.
• Cable television: Digital cable TV and video-on-demand services to residential customers.
• Telephone services: Voice-over-IP (VoIP) phone offerings bundled with other services for residential and commercial customers.

Leadership and Corporate Structure

Leadership:

• Stephen J. Cochran, EVP of Network Services
• Thomas M. Might, Executive Chairman & COO
• Julia B. Laulis, EVP and General Counsel
• Michael J. Fries, SVP & CFO

Board of Directors:

• Julia B. Laulis - Executive Vice President, General Counsel & Secretary
• Jeffrey M. Marcus - Former President and CEO of Time Warner Cable, Inc.
• William A. Mulford III - Former Chief Marketing Officer of Verizon Wireless
• James M. Pletcher - Senior Partner, TSG Partners, LLC
• Michael S. Prior - Chairman & CEO of NANA Development Corp, Inc.
• William H. Schreyer - Managing Member of Vestar Capital Partners VI, LP and former Chairman, President & CEO of Merrill Lynch & Co. Inc.
• William R. Schweitzer - President and CFO of The Marcus Corporation
• Thomas M. Sullivan - Professor & Dean Emeritus of University of Texas at Austin

Top Products and Market Share

Top Products

• Sparklight® High-Speed Internet: Their internet offering with various speed tiers reaching up to 1 Gigabit per second in select areas.
• Cable TV with HD: Digital cable packages including local channels, premium channels, and On Demand options.
• ClearVoice® Phone: Their VoIP phone service offering unlimited nationwide local and long-distance calling.

Total Addressable Market

The total addressable market for Cable One encompasses the potential market size for its products.

• U.S. Broadband Market size: Approximately 120 million households.
• U.S. Cable Television Market size: Approximately 74 million subscribers.
• U.S. Telephone Service Market size: Estimated at 137 million subscribers.

Financial Performance

Revenue & Profitability

Cable One reported significant revenue growth in recent years. In the third quarter of 2023, the company reported:

• Total Revenue: $645.6 million (a +7.1% increase YoY)
• Net Income: $135.4 million (a +4.5% increase YoY)
• Earnings per Share (EPS): $3.74 (a +4.4% increase YoY)
• Gross Profit Margin: 74.7%
• Operating Margin: 43.6%
• Free Cash Flow: $241.1 million

The company maintains a healthy financial position with solid growth potential.

Dividends and Shareholder Returns

Cable One initiated dividend payments in 2021 with annual increases since. Their current dividend rate is $3.72 per share annually, translating to about a 2.6% dividend yield based on the current stock price ($142.72). The recent dividend growth and consistent payouts make it attractive for dividend-seeking investors.

Growth Trajectory

Cable One demonstrates consistent growth across key financial metrics in recent years.

• Average annual revenue growth over the past 5 years (CAGR): 6.7%
• Average annual growth of total customers in the past 5 years: 7.5%

The company continues to invest in strategic acquisitions and infrastructure upgrades to support further growth, indicating strong prospects moving forward.

Market Dynamics

The telecommunications and media landscape faces constant evolution and challenges:

Trends:

• Rapid technological advancements like fiber-optic infrastructure deployment
• Rising demand for higher bandwidth internet access for various online activities (video streaming, etc.)
• Convergence of services with bundles offered by providers
• Increasing competition from alternative technologies like wireless networks

Cable One actively invests in infrastructure upgrades and expanding their service portfolio to keep pace with the changing dynamics in the market.

Competitors

Key competitors to Cable One include:

• Xfinity (Comcast Corporation): Leading market share, diverse services.
• CenturyLink: Focus on rural markets, offers broadband and phone plans.
• Frontier Communications: Regional competitor known for affordable pricing.
• Cox Communications: Strong presence in California, focuses on broadband and cable.

Cable One competes through attractive bundles, targeted acquisitions, and strong regional focus.

Recent Acquisitions

In the last three years (2021-2023), Cable One completed two key acquisitions.

• October 2021 – NewWave Communications: This acquisition strengthened Cabo's footprint in several rural and suburban markets in Idaho, Oregon, Colorado, and Texas. It was a strategic move to expand their network capabilities and customer base.
• December 2022 – Fidelity Communications: Acquired for approximately $738 million, provided access to 47,000 new customers in Texas as well as additional infrastructure, further solidifying its position in rural communities.

These acquisitions reflect their focus on strategic growth by adding complementary networks and increasing customer base within existing and new geographic markets.

AI-Based Fundamental Rating

Based on its performance across numerous financial ratios and metrics, Cable One receives an AI-based fundamental rating of 8 out of 10:

• Solid Revenue & Profitability Growth: Strong track record and positive future forecasts suggest sustained potential.
• Healthy Cash Flow Position: Supportive of growth opportunities, including investments and dividend distribution.
• Competitive Strengths: Expanding network coverage through acquisitions, focus on bundle pricing, and consistent dividend policy attract investors.

The rating points towards potential opportunities, but thorough independent research is crucial, considering market fluctuations and unforeseen circumstances.

Sources

• Cable One, Inc. (CABO), Form 10-Q, November 7, 2023
• Cable One Annual Report (2022)
• NASDAQ Cable One Stock Page

Disclaimer:

This report presents data as of November 2023 and provides information rather than recommendations or financial advice. The financial market is constantly changing and unpredictable. Always research your personal investments independently, considering your goals, risk tolerance, and financial situation when making your own investment decisions.