As the economy has crumbled and the telcos have watched their customers cut cords and retrench, cable companies have benefited from being perceived as a safer investment option. Since this time last year, shares of Comcast (s CMCSA), which trades on the Nasdaq, have fallen by 12 percent while NYSE-listed Time Warner Cable (s TWC) shares slid by 20 percent — the Nasdaq Composite Index, meanwhile, as plunged 45 percent while the S&P 500 (of which Comcast is a component), has sunk 42 percent. But Rich Greenfield over at Pali Research isn’t sure cable will stay above the fray for much longer.
In a note to clients, he points to an estimated 20-30 percent drop in the cable firms’ ability to add new subscribers, saying customers downgrading their service plans in response to the economy and increasing expenditures related to wireless investments should give investors pause. He also sees a slowdown in the growth of cable voice services — a high-margin business that also reduces churn — but one that might be tapped out as folks abandon landlines. As for Comcast and Time Warner Cable, Greenfield has a neutral rating on the shares of both companies. To me this drives home how much people pay for communications services across a variety of different providers — there is plenty of room for consolidation that might leave both cable companies and the carriers grasping at subscribers.