Altice USA gains again, as analysts debate what Suddenlink sale could draw
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Altice USA (NYSE:ATUS) is up 2.4% Friday afternoon, tacking on to sharp gains it made midday Thursday following a report that it's exploring a sale of Suddenlink that could bring up to $20B.
The prospect of such a sale (and the debt relief it could bring Altice USA) sent the stock more than 22% higher on Thursday. While the stock has a market cap of $5.1B, it reports over $33B in assets - and a little more than that in liabilities, with more than $25.5B of that in long-term debt.
New Street Research has upgraded Altice USA (ATUS) to Buy, saying such a deal has been part of chatter and is "reasonably likely." But even after Thursday's 20% gain, "the probability-weighted upside is compelling enough for us to upgrade the stock," analyst Jonathan Chaplin and team said.
A $20B sale would suggest a multiple of 14x EBITDA of $1.4B, "which seems high ... but not impossible," New Street says. The firm says the median multiple for fiber and cable deals over the past few years has been 14x; that Suddenlink is a "good asset" in markets with limited competition, and is underpenetrated; and that any cash buyer would see tax benefits besides.
It's set a new price target of $15, implying another 30% upside ahead.
BofA meanwhile is switching to "No Rating" on Altice USA (ATUS), saying the shares are no longer trading on their fundamentals. It sees a potential 15x EV/EBITDA multiple on the deal as a "significant disparity" from public multiples which would be difficult for the company to capture.
The most likely strategic public buyer would be Charter (CHTR), analyst Jessica Reif Ehrlich suggests, but even that deal is "very unlikely" as Charter likely wouldn't pay that premium, she says - pointing more toward a buyer in private equity.
European cableco Altice made its entry into the U.S. market with a 2015 deal to buy the country's seventh-largest cable company for about $9B.