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Altice USA: 7%+ Free Cash Flow Yield And Aggressive Buybacks

Mar. 08, 2021 5:58 PM ETAltice USA, Inc. (ATUS) Stock3 Comments
Librarian Capital profile picture
Librarian Capital


  • We review our ATUS investment case after shares fell 14% from their December peak, giving them a 7%+ Free Cash Flow Yield.
  • Q4 results were solid, with year-on-year growth of 2.5% in revenues and 6.1% in EBITDA; broadband customers were sequentially stable.
  • 2021 outlook is for broadband net adds to be at least as good as 2019, revenue and EBITDA both to grow, and for $1.5bn of buybacks.
  • With fixed CapEx, new debt in line with EBITDA growth and the share count falling, Free Cash Flow / Share can grow at mid-teens.
  • With shares at $33.09, we expect an exit price of $65 at 2024 and a total return of 95% (19.1% annualized). Buy.
AT&T Advises Its Over 200,000 Workforce To Work From Home, As Coronavirus Continues To Spread
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We review our Altice USA (NYSE:ATUS) investment case after shares fell 14% from their December peak, giving them a 7%+ Free Cash Flow ("FCF") Yield. Since we upgraded our rating to Buy last November, ATUS shares have risen

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Comments (3)

stockstudent111 profile picture
great article thanks - question: what would the IRR be if you took EBITDA growth down to 1% ? I assume more like a 12-14% IRR? Thanks
On The Lake profile picture
Any thoughts on the high short interest in ATUS? (What is the bear case?)
Librarian Capital profile picture
@On The Lake $ATUS is more highly levered than other Cable companies (5.3x Net Debt / EBITDA as mentioned above), so it's higher risk and higher rewards.

With regards to the downside risk, the biggest one is of course broadband subscriber losses, especially to FIOS in the 25% of ATUS' footprint where the two compete. Again as mentioned above, ATUS historically has had lower subscriber growth then peers.

ATUS is, however, much cheaper and my argument is that a upgraded, fully competitive broadband offering has substantially removed this downside risk.
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