Altice USA: Don't Buy Into 22% Rebound Since Q2 Results

(Preview) Company Update (ATUS US) (Neutral)

Summary

• ATUS shares have risen 22% after Q2 results last Thursday, but we consider this merely a result of the levered nature of its equity.

• Q2 results did not show any meaningful improvement, with both customer numbers and profits down again.

• ATUS has made progress in initiatives such as its fiber roll-out, but we are unconvinced about the efficacy of at least some of them.

• Most positively, management comments supported our views about the sector's Q2 seasonality and Fixed Wireless being a limited threat.

• ATUS looks superficially cheap with a double-digit Free Cash Flow Yield, but the downside risks are too high. Avoid the stock.

Introduction

Altice USA, Inc. reported Q2 2022 results after markets closed last Thursday (August 3). ATUS shares rose 21.5% the following day and have remained at roughly that level since.

We downgraded our rating on ATUS from Buy to Hold in November 2021, after we saw our original investment case as having broken. ATUS stock is currently 37% down from the level at…