Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Frontier Communications Inc. Gained 18.9% in February

By Daniel B. Kline - Mar 2, 2016 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cable and Internet company held onto more video subscribers than expected showing that it's winning the war on cord cutters

Call the fourth quarter of 2015 the period where the cable industry showed that cord cutting would not create quick devastation of the pay-television model. During the three month period all the major companies in the space reported either slight losses or slight gains.

Frontier Communications (FTR) followed those trends only losing 5,800 video customers. That number, along with generally positive Q4 results, which it reported on Feb. 23, sent the company's stock up from $4.55 where it closed on Jan. 29 to $5.41 at the end of the last trading day of February, an 18.9% increase according to data provided by S&P Global Market Intelligence.

Source: YCharts.com

What: Even though it lost 1.7% of its business customer base along with 0.7% of its residential users, Frontier did post a gain of 28,500 net broadband customers in Q4. But, the only number that mattered was the video subscriber count which saw a drop, but only a small one. That's in line with what other companies in the cable space reported and it's good news in the short-term, if not a definitive statement that cord cutting won't prove to be a big deal.

So what: In the first two quarters of 2015 it looked like cord cutting might be accelerating. That seemed to make sense because it's logical that consumers would look to drop very expensive cable bills in favor of lower-cost streaming options.

An exodus from pay-TV could have hurt Frontier more than most companies because it markets itself as a cheaper alternative to traditional cable companies. Without price as a selling point, the company has very little to hang its hat on. But, at least for now, it seems that the number of people willing to trade big, bloated packages of cable channels in for cheaper streaming options is relatively small.

Now what: Frontier, like the rest of the cable industry has bought itself time. Cord cutting may not be here yet, but it's creating downward pressure on cable bills. This could force companies to hold prices in check and cause them to offer cheaper, skinny bundles with less channels at a lower price.

Like the rest of the pay-TV companies Frontier will have to change going forward. At some point business as usual won't work because enough viable choices will emerge for consumers to feel comfortable dropping cable. That day however is not here yet and the company, along with the industry, has time to make the needed adjustments.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Frontier Communications Corporation Stock Quote
Frontier Communications Corporation
FTR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.