With regulation-averse Republicans now set to control both sides of Congress as well as the White House, MoffettNathanson analyst Craig Moffett reversed his downgrade of Charter Communications, taking the MSO back up to “buy” from “neutral.”
In fact, in his note to investors today, Moffett seemed to upgrade the entire cable business.
“Broadband price regulation has long been our No. 1 risk to cable stocks,” he said. “A legislative (rather than administrative) solution could eliminate the risk of broadband rate regulation not just for the duration of the Trump presidency — editorial comment deleted — but for years to come.”
Cable operators, he added, will be able to price video on their networks as they see fit.
“Even the risk of OTT video substitution is now largely neutralized, as cable operators will now more likely be able to price OTT video transport explicitly, either through usage-based pricing or simply through higher stand-alone broadband prices, directly offsetting any risks to the video profit pool,” Moffett said.
In February 2015, citing the looming issues of over-the-top competition and Title II regulation of broadband services, top cable analyst Craig Moffett has downgraded the stocks of Comcast, Time Warner Cable and Charter Communications to neutral.
"It would be naive to believe that the imposition of a regime that is fundamentally about price regulation, in an industry that the FCC has now repeatedly declared to be non-competitive, wouldn't introduce risk to future pricing power," Moffett said at the time. "Terminal growth rate assumptions need to be lowered.”
But Tuesday’s shocking election results have changed everything.
“Republicans in both Congress and the FCC have expressed their antipathy towards Title II regulation,” the analyst said today. “A Congressional roll-back of Title II was never a serious option in a Democratic administration. President Obama made it clear that he stood ready with a veto. With the risk of a veto now gone, a legislative remedy now not only looks possible, but likely.”