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What Do Altice’ Risk Factors Indicate?

Altice USA, Inc. (ATUS) provides broadband communications and video services in the U.S. It caters to over five million customers across 21 states via its Optimum and Suddenlink brands. The company also offers news through its News 12, Cheddar, and i24NEWS networks.

Altice’s recent Q2 results were a mixed bag, missing out on earnings but outperforming revenue estimates.

Let’s take a look at the company’s financial performance and what has changed in its key risk factors that investors should be aware of.

Driven by growth in Broadband and News & Advertising, Altice’s Q2 revenue increased 1.7% year-over-year to $2.52 billion, beating the Street’s estimate by $3.58 million.

The CEO of Altice, Dexter Goei, said, “As the states and businesses in which we operate have been reopening more widely, Altice USA has seen an acceleration in revenue growth led by Advertising and Business Services. Our Residential business remains extremely focused on achieving faster broadband customer growth going forward from a faster pace of footprint expansion and network upgrades, including fiber.”

Earnings per share jumped to $0.43 versus $0.19 a year ago but lagged consensus of $0.47. Altice plans to align all of its connectivity brands under one national Optimum brand and continue to invest in products such as Optimum Stream and Suddenlink Stream to support an increase in video streaming. (See Altice stock chart on TipRanks) 

Looking ahead to Fiscal Year 2021, the company expects growth in revenue as well as adjusted EBITDA. It expects to incur capital expenditures between $1.3 billion and $1.4 billion.

Following Altice’s Q2 performance, Deutsche Bank analyst Bryan Kraft reiterated a Buy rating on the stock but decreased the price target to $40 from $43.

“The company’s Q2 was disappointing, primarily due to the lack of broadband net additions and commentary on the forward outlook that suggested the same pressures, namely higher move churn, have continued through July,” the analyst said.

Based on 6 Buys, 3 Holds, and 1 Sell, consensus on the Street is a Moderate Buy. The average Altice price target of $39.30 implies 25.7% upside potential. Shares are down 14.8% so far this year.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, Altice’s main risk category is Finance & Corporate, which accounts for 85% of the total 13 risks identified. Since May, the company has added one new risk factor under Macro & Political category.

The company highlights that its financial condition and results may be negatively affected by the COVID-19 pandemic. This impact depends on factors like the duration of containment measures, consumer spending dynamics, financial condition of consumers and measures taken by the government authorities.

The company states that executive orders in New Jersey require Altice to maintain broadband service and not impose late fees for certain non-paying customers. Further, proposed legislation in New York, if enacted, will require Altice to maintain broadband, video, and voice services for non-paying customers and offer deferred payment plans to customers experiencing financial difficulty. Altice as well as its suppliers and vendors could be impacted by such measures.

The Finance & Corporate risk factor’s sector average is at 45%, compared to Altice’s 85%.

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