Cable's Cloudy Future: 5 Cable TV Stocks Bucking the Trend

Becca Lipman and Eben Esterhuizen, Kapitall, The Motley Fool
Updated

An increasing number of people are dropping pay-TV subscriptions and opting for more web-based programming -- is this the end of cable television?

While the allure of live sports and premium channels such as HBO are still keeping many tethered to their cable box, these viewers are quickly becoming a minority as more pay-TV viewers find an upside to cutting the cord.

U.S. cable companies are taking a hit nationwide: Comcast lost 238,000 TV subscribers in the second quarter of this year, Time Warner Cable lost 130,000 while Satellite TV provider Dish Network lost 135,000 subscribers. "Its larger competitor, DirecTV, added 26,000, but that's down from the 100,000 it added in the second quarter last year." reports USA TODAY.

Pay-TV customers making the cuts have reasoned that Cable TV is too expensive, or has too many unnecessary channels, or in some cases simply lacks the convenience of an iPad. Unemployment has also left money-conscious consumers quick to erase the cable bill from their expenses.

The increased alternatives have also made a big impact. Newer technologies have flooded the market and made it easier for viewers to stream their entertainment for free or close to it. A few examples from USA TODAY:

  • A pair of rabbit-ear antennas receives local channels live via free, over-the-air digital TV signals.

  • A home with broadband connectivity can get current TV episodes from major networks on websites such as NBC.com, while older episodes are available at video destinations such as Amazon.com's On Demand video service. Many newer smart TVs let viewers bypass the computer with built-in apps for Netflix, Hulu, and Vudu, a Wal-Mart-owned video-rental website.

  • Video game systems have emerged as programming hubs, too. Sony's PlayStation 3 and Microsoft's Xbox 360 can be used to access Hulu and Netflix; the PS3 also gets Vudu, while the Xbox 360 has ESPN on Xbox Live. Even Nintendo's Wii streams Netflix, which has more than 25 million subscribers.

But cable companies haven't been sitting idly by. Their focuses are now on service expansions to accommodate social media, streaming media, personalized viewing, and more.

Comcast has been a front-runner, offering free streaming movie services through its free Xfinity app. Meanwhile, "DirecTV is developing an app for moving programming stored on DVRs onto the iPad (available in some markets by year's end) and another for streaming live content to the iPad." (via USA Today)

These new approaches aim to keep viewers on paid subscriptions. Do you think it will work in the long run, or will the Cable TV industry give way to web-based programming?

To help you analyze the future of pay-TV we include a universe of cable TV stocks that have rising earning per share (EPS) estimates.

Wall Street analysts think there are more earnings upside to these companies -- do you agree? (Click here to access free, interactive tools to analyze these ideas.)

1. DIRECTV (NYS: DTV) : Provides digital television entertainment in the United States and Latin America. The EPS estimate for the company's current year increased from 3.28 to 3.37 over the last 30 days, an increase of 2.74%. This increase came during a time when the stock price changed by -3.83% (from 43.07 to 41.42 over the last 30 days).

2. Discovery Communications (NAS: DISCA) : Operates as a non fiction media and entertainment company worldwide. The EPS estimate for the company's current year increased from 2.32 to 2.36 over the last 30 days, an increase of 1.72%. This increase came during a time when the stock price changed by 0.34% (from 38.18 to 38.31 over the last 30 days).

3. Shaw Communications (NYS: SJR) : Provides broadband cable television, Internet, digital phone, telecommunications, and satellite direct-to-home (DTH) services primarily in Canada and the United States. The EPS estimate for the company's current year increased from 1.51 to 1.56 over the last 30 days, an increase of 3.31%. This increase came during a time when the stock price changed by 0.23% (from 21.47 to 21.52 over the last 30 days).

4. Virgin Media (NAS: VMED) : Provides of entertainment and communications services in the United Kingdom. The EPS estimate for the company's current year increased from 0.75 to 0.83 over the last 30 days, an increase of 10.67%. This increase came during a time when the stock price changed by 4.07% (from 23.57 to 24.53 over the last 30 days).

5. AMC Networks (NAS: AMCX) : Operates various cable televisions' brands delivering content to audiences and a platform to distributors and advertisers in the United States and internationally. The EPS estimate for the company's current year increased from 1.67 to 1.77 over the last 30 days, an increase of 5.99%. This increase came during a time when the stock price changed by -3.88% (from 34.31 to 32.98 over the last 30 days).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Becca Lipman and Eben Esterhuizen do not own any of the shares mentioned above. EPS data sourced from Fidelity.

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