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Shaw Communications Cut to Hold, Customer Churn High
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On Sep 20, 2016, Zacks Investment Research downgraded Canadian cable TV behemoth Shaw Communications, Inc. to a Zacks Rank #3 (Hold) from a Zacks Rank #1 (Strong Buy). The company has been persistently losing video cable and video satellite customers owing to rising competition.
Consumer Loss
Shaw Communications has been persistently reporting decline in its varied consumer segments since the second quarter of 2016. Apart from the loss of video cable and video satellite customers, the company lost 27,482 Video Cable subscribers and 8,760 Internet customers in the third quarter of fiscal 2016. Moreover, landline phone subscriber count fell by 14,861 in the reported quarter. However, the company saw an increase in video-satellite subscribers of 3,847.
Cash and Liquidity
Considerable debt, escalating capital expenditure and a deteriorating cash position may act as near-term risks. At the end of third-quarter 2016, Shaw Communications had cash of $248 million, compared with $304.6 million at the end of fiscal 2015. Free cash flow was around $142.3 million, down 28.9% year over year. Meanwhile, total outstanding debt was $5,243.7 million and the debt-to-equity ratio stood at 1.1, compared with 1.24 at the end of fiscal 2015.
Other Risks
The Canadian wireless market is predominantly controlled by three big players. Apart from Rogers Communications Inc. (RCI - Free Report) , TELUS Corp. (TU - Free Report) and BCE Inc. (BCE - Free Report) are other two incumbents. Together, these firms control around 90% of the total market. Despite the fact that WIND Mobile is the fourth largest wireless operator, its current scale of operation considerably lags that of the wireless giants.
Rolling out of new brands and advertising promotions are likely to raise expenses going ahead. The company also expects additional network fees in the forthcoming quarters. These combined costs will impact margins moving ahead.
Positives
Shaw Communications’ recent divestiture of subsidiary Shaw Media Inc. to Corus Entertainment Inc., places it as a pure-play Canadian telecom company with a solid growth profile. Further, venturing into the Canadian wireless market will prove beneficial for the company. Shaw Communications’ recent launch of mobile TV platform – FreeRange TV – and its SmartWiFi and SmartSecurity Services bode well. The company is also launching high-speed Internet services like WideOpen Internet 150 and is also entering into tie-ups to boost its cloud suit.
Recent Developments
In Aug 2016, Shaw Communications and TransLink announced an alliance which will provide free WiFi connections to passengers travelling between Downtown Vancouver and the North Shore on the SeaBus.
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Shaw Communications Cut to Hold, Customer Churn High
On Sep 20, 2016, Zacks Investment Research downgraded Canadian cable TV behemoth Shaw Communications, Inc. to a Zacks Rank #3 (Hold) from a Zacks Rank #1 (Strong Buy). The company has been persistently losing video cable and video satellite customers owing to rising competition.
Consumer Loss
Shaw Communications has been persistently reporting decline in its varied consumer segments since the second quarter of 2016. Apart from the loss of video cable and video satellite customers, the company lost 27,482 Video Cable subscribers and 8,760 Internet customers in the third quarter of fiscal 2016. Moreover, landline phone subscriber count fell by 14,861 in the reported quarter. However, the company saw an increase in video-satellite subscribers of 3,847.
Cash and Liquidity
Considerable debt, escalating capital expenditure and a deteriorating cash position may act as near-term risks. At the end of third-quarter 2016, Shaw Communications had cash of $248 million, compared with $304.6 million at the end of fiscal 2015. Free cash flow was around $142.3 million, down 28.9% year over year. Meanwhile, total outstanding debt was $5,243.7 million and the debt-to-equity ratio stood at 1.1, compared with 1.24 at the end of fiscal 2015.
Other Risks
The Canadian wireless market is predominantly controlled by three big players. Apart from Rogers Communications Inc. (RCI - Free Report) , TELUS Corp. (TU - Free Report) and BCE Inc. (BCE - Free Report) are other two incumbents. Together, these firms control around 90% of the total market. Despite the fact that WIND Mobile is the fourth largest wireless operator, its current scale of operation considerably lags that of the wireless giants.
Rolling out of new brands and advertising promotions are likely to raise expenses going ahead. The company also expects additional network fees in the forthcoming quarters. These combined costs will impact margins moving ahead.
Positives
Shaw Communications’ recent divestiture of subsidiary Shaw Media Inc. to Corus Entertainment Inc., places it as a pure-play Canadian telecom company with a solid growth profile. Further, venturing into the Canadian wireless market will prove beneficial for the company. Shaw Communications’ recent launch of mobile TV platform – FreeRange TV – and its SmartWiFi and SmartSecurity Services bode well. The company is also launching high-speed Internet services like WideOpen Internet 150 and is also entering into tie-ups to boost its cloud suit.
Recent Developments
In Aug 2016, Shaw Communications and TransLink announced an alliance which will provide free WiFi connections to passengers travelling between Downtown Vancouver and the North Shore on the SeaBus.
SHAW COMMS-CL B Price and Consensus
SHAW COMMS-CL B Price and Consensus | SHAW COMMS-CL B Quote
Stocks to Consider
A couple of better-ranked telecommunication stocks include NTT DOCOMO, Inc. and Nippon Telegraph and Telephone Corporation , both holding a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>