Cable companies among JPMorgan's 2014 top picks
Here is a breakdown of three of the investment bank's recommendations for the new year.
By Nelson Hem
Like at all the other Wall Street firms, analysts at JPMorgan (JPM) have made their recommendations for 2014.
Below we take a look at how these three stocks have fared and what analysts in general expect from them.
Note that, in their report, the JPMorgan analysts also liked Charter Communications, which is pursuing an acquisition of Time Warner Cable, T-Mobile US, which is also a buyout candidate, and SBA Communications, a peer of American Tower.
This wireless and broadcast communications infrastructure company is expected to report strong results for the quarter that just ended, and it was recently featured positively in Barron's. It sports a market capitalization of more than $31 billion and offers a dividend yield of around 1.5 percent. Its long-term earnings per share (EPS) growth forecast is more than 23 percent.
The number of shares sold short in American Tower represented less than two percent of the float as of the December 13 settlement date. That was almost twice the level of short interest a year ago. It would take more than three days to close out all short positions.
All but one of the 21 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, with six of them rating the stock at strong buy. Their mean price target, or where the analysts think the share price will go, is about 16 percent higher than the current share price. JPMorgan's price target is about the same as the consensus target.
Though shares have faced resistance around $80 since October, the share price is about 11 percent higher than six months ago. It is above the 50-day and 200-day moving averages. But the stock has underperformed competitor SBA Communications, as well as the S&P 500, over the past six months.
The biggest cable company in the country has offset shrinking TV subscriber numbers with growth in its internet offerings and its focus on small businesses. The company has a market cap near $133 billion. Its dividend yield is about 1.5 percent, and the long-term EPS growth forecast is about 19 percent.
The short interest in Comcast was about one percent of the total float as of the most recent settlement date. That was the greatest number of shares sold short since last April. It would take more than two days to close out all of the short positions.
Of the 30 analysts polled, 10 rate the stock at strong buy and another 14 also recommend buying shares. The analysts' consensus price target indicates only marginal potential upside, but the JPMorgan price target is more than 13 percent higher than the current share price.
The share price ended last year at a multiyear high, but it has pulled back almost two percent since then. It is still well above the 50-day moving average. Over the past six months, the stock has outperformed not only the broader markets, but competitors Time Warner Cable and DirecTV as well.
Time Warner Cable
The second largest cable company recently renewed deals with Viacom and Discovery Communications, avoiding a repeat of the dispute with CBS from earlier last year. The company has a market cap of more than $37 billion and a dividend yield near 1.9 percent. Its return on equity is almost 28 percent.
After rising nearly five percent from the previous period, by mid-December the number of shares sold short reached its highest level since last April. That represented a little more than two percent of the total float. The days to cover remained about 1.5 during the period, its lowest level in the past year.
Seventeen of the 30 surveyed analysts recommend buying shares and none recommend selling. Yet they feel shares have no room to run as their mean price target is about the same as the current share price. The JPMorgan price target is even lower than the consensus target.
Shares reached a new multiyear high in early December, but the share price has retreated more than two percent since then. It remains about the 50-day and 200-day moving averages. Over the past six months, the stock has underperformed Comcast but outperformed Charter Communications and the S&P 500.
At the time of this writing, the author had no position in the mentioned equities.
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The company has made at least 4 acquisitions in the space, and few people have paid any attention.
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