Will Cablevision See a Rising Stock Price?

With shares of Cablevision (NYSE:CVC) trading around $19, is CVC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Cablevision provides telecommunications and media services and operates in two segments: Telecommunications Services and Other. The Telecommunications Services segment is involved in the television business including video, high-speed data, and VoIP. The Other segment offers Newsday, a daily newspaper; amNewYork, a free daily newspaper; Star Community Publishing, a group of weekly shopper publications; and its online media portals, newsday.com and exploreLI.com. It also engages in the motion picture theatre business through Clearview Cinemas, a regional news programming service, the MSG Varsity network service, and cable television advertising.

Cablevision predicted it will move from offering cable TV to just broadband Internet services in the future, citing greater consumer preference for watching material online. CEO James Dolan told The Wall Street Journal, “I don’t want to be saddled with an infrastructure that is as big as the one that I have now.” Dolan added that he remains committed to the customer, something he says will help the company survive in the future.

T = Technicals on the Stock Chart are Strong

Cablevision stock has made an impressive move since reaching lows just last year. The stock is now trading at highs for the year, and seems ready to keep going. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Cablevision is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

CVC

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Cablevision options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Cablevision Options

53.69%

96%

93%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is average demand from call buyers or sellers, and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts, and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates, and what that means for Cabevision’s stock.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. In addition, reactions to the last four quarterly earnings announcements can help gauge investor sentiment on Cablevision’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Cablevision look like, and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-62.07%

-128.57%

103.21%

-107.14%

Revenue Growth (Y-O-Y)

0.80%

-0.75%

-1.61%

1.18%

Earnings Reaction

5.20%

0.77%

-9.56%

-6.29%

Cablevision has seen mixed earnings and revenue figures over the last four quarters. From these numbers, it seems the markets have had mixed feelings about Cablevision’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Cablevision stock done relative to its peers, Time Warner Cable (NYSE:TWC), Charter Communications (NASDAQ:CHTR), Comcast (NASDAQ:CMCSA), and sector?

Cablevision

Time Warner Cable

Charter Communications

Comcast

Sector

Year-to-Date Return

31.53%

20.35%

69.54%

22.16%

29.47%

Cablevision has been a relative performance leader, year-to-date.

Conclusion

Cablevision is a provider of telecommunications and media services to clients on the East Coast of the United States. The company recently made statements about which direction the company is likely to take in the future. The stock is now trading at highs for the year, and looks poised to continue rising. Over the last four quarters, earnings and revenue figures have been mixed, which has led to confusion among investors in the company. Relative to its peers and sector, Cablevision has been a year-to-date performance leader. Look for Cablevision to OUTPERFORM.

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