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Why Altice USA Stock Lost 17% Last Month

By Jeremy Bowman - Dec 2, 2019 at 4:17PM

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The cable provider had a weaker-than-expected earnings report.

What happened

Shares of Altice USA ( ATUS 4.10% ) were sliding last month after the cable and internet provider posted disappointing third-quarter results and lowered its full-year guidance. According to data from S&P Global Market Intelligence, the Optimum parent finished the month down 17%.

As you can see from the chart blow, those losses came almost entirely after the earnings report came out Nov. 5.

ATUS Chart

ATUS data by YCharts.

So what

The stock crashed 17% on Nov. 6 following the earnings release, as revenue rose 0.9% to $2.44 billion, missing estimates at $2.48 billion. The weak growth was affected by a 4.3% decline in sales from its News and Advertising segment, though that was expected due to a decline in political advertising since 2019 is not an election year. 

Cable cords going into the back of a box

Image source: Getty Images.

Like other cable providers, Altice continued to feel the effects of cord-cutting as it lost 32,000 cable subscribers in the quarter. But the company added 15,000 broadband subscribers and said overall customer relationships were up 0.7%.

Further down the income statement, operating income fell 6.7% to $471.5 million as the company continues to make investments in its network, and earnings per share rose from $0.04 to $0.12 due to a lower tax rate, but that was short of expectations at $0.15.  

CEO Dexter Goei overlooked the weaker-than-expected performance and touted the company's investments, saying, "As we now turn our focus to scaling our efforts, we look forward to accelerating our revenue and adjusted EBITDA growth in 2020 as we begin to realize the benefits of our investments."

Now what

Despite Goei's optimism about next year, Altice still lowered its guidance for 2019. It now sees revenue growth of 2.5%, down from a previous range of 3% to 3.5%. The company noted the initial contribution from its launch of Altice Mobile (its push to be a wireless provider), but said the lack of online sales of handsets had proved to be a headwind. The upcoming launch of that sales channel should accelerate revenue growth next year. 

Shares of Altice had marched higher this year and are still up 54% year to date, which may partly explain the post-earnings sell-off. Though optimism exists for Altice Mobile, it's more muted after the guidance cut and weak third-quarter numbers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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