What: Shares of cable provider Cablevision Systems Corporation (NYSE: CVC) jumped 18% last month, according to data from S&P Capital IQ. The chart below tells the story:
So what: The New York-based parent of Optimum cable, Internet, and phone services got a 7% boost on July 10 as Patrick Drahi, the chairman of multinational cable and telecom giant Altice said Cablevision would make a good takeover target. Drahi also named Cox Communications as a potential acquisition in an interview with the Wall Street Journal. There's good reason to take Drahi at his word. The tycoon already snatched up one American cable provider, acquiring Suddenlink for $9.1 billion in May, and says he would one day like to divide his assets half-and-half between the U.S. and the rest of the world.
M&A activity has been hot recently in the cable industry with the merger of AT&T and DirecTV and Charter Communications' proposed takeover of Time Warner Cable.
Now what: It's no surprise to see a stock fly on takeover rumors. With its strong presence in the New York market, Cablevision could also make a promising acquisition for a company like Comcast, the nation's leading cable provider which lacks a presence in the country's biggest media market.
Cablevision shares reached a four-year high on the news, and its gains were enough to prompt a downgrade from Jefferies to Hold during the middle of the month as analysts believe the increasing valuation will make an acquisition less likely.
While cord-cutting has led to a small decline in overall cable subscriptions, Internet sign-ups are soaring industrywide, buoying stocks like Comcast and Time Warner Cable that were supposed to be struggling.
To Cablevision's credit, it's come out at the forefront of its industry with its move to offer HBO Now, making it unique among cable providers. That kind of positioning may make the company a better bet than some of its rivals. Look for more color when the Optimum parent reports earnings on Friday.
