Comcast (CMCSA), Charter Communications (CHTR) and other cable TV firms are better off dominating in high-speed internet services to homes than are wireless kings such as AT&T and Dow component Verizon Communications amid fierce price competition, says SunTrust Robinson Humphrey.
SunTrust on Wednesday initiated coverage of Comcast, Charter and Cable One (CABO) with buy ratings. AT&T (T), Verizon (VZ) and Sprint (S) were rated neutral, with only T-Mobile US (TMUS) garnering a buy. SunTrust initiated Dish Network (DISH) with a hold rating.
"We generally prefer cable over wireless right now, as we believe the former has a more supportable growth outlook and greater potential to preserve margins," said Greg Miller, a SunTrust analyst in a report.
"In comparison to the national wireless market, competition faced by cable is relatively benign, in our view," he added.
T-Mobile has grabbed subscriber and industry revenue share since 2014 with price cuts and promotional perks for consumers. Miller set a price target of 76 on T-Mobile stock. T-Mobile stock edged up 0.8% to close at 65.13 on the stock market today. Shares in Comcast dipped 0.2% to 37.53.
IBD'S TAKE: T-Mobile stock has gained 13% in 2017 and has neared a buy point of 65.51. T-Mobile has had the highest revenue growth among the top four wireless firms for three years. Learn more at IBD Stock Checkup.
"While market share gains from earlier Uncarrier initiatives are not likely to be replicated, the company's competitive and financial position is much improved," Miller said. "Continued network improvement and market expansion provide the foundation for further share gains and the company remains an attractive acquisition target."
Both Verizon and AT&T are investing in 5G wireless technologies that could provide more competition to the cable TV industry's dominance in residential broadband services.
"We look for the largest wireless carriers to essentially tread water from a growth perspective while they collectively reposition the companies for the future. Although we believe cable companies will likely outperform in the next year, we also believe their last-mile video delivery systems will be increasingly challenged by newer (wireless) technologies," Miller said.
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