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2 Stocks to Watch From a Challenging Cable Television Industry
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The Zacks Cable Television industry players are focusing on bundled offerings and on-demand programming to counter challenges from cord-cutting as consumers shift away from traditional pay-TV options, including cable TV and satellite TV, to over-the-top streaming services with innovative content. The industry is evolving by leveraging its broadband infrastructure to meet changing consumer preferences and balancing traditional cable services with new streaming options to maintain relevance in the rapidly changing media landscape. Cable companies are benefiting from consistent demand for high-speed broadband and WiFi devices, driven by hybrid work and learning environments. Increased media consumption has been a key catalyst for industry leaders like Naspers (NPSNY - Free Report) and WideOpenWest (WOW - Free Report) .
Industry Description
The Zacks Cable Television industry comprises companies offering integrated data, video and voice services, including pay-TV and Internet-based streaming content. These firms provide equipment like satellite dishes, digital set-top receivers and remote controls. Cable companies typically build or lease network backbones from telecom companies and purchase licenses to distribute programmers' content over these networks. They license content from programmers and sell advertising spots. The industry is capital-intensive, requiring significant investment in infrastructure, and is heavily regulated by the Federal Communications Commission. Industry players must balance the need for ongoing investment in technology and infrastructure with evolving consumer preferences and regulatory compliance to maintain competitiveness in the media landscape.
4 Trends Shaping the Future of the Cable Industry
Skinny Bundles, Original Content Driving Growth: Cable television’s ability to generate ad revenues outside traditional TV platforms, such as websites and any digitally-consumed platform, provides increased scope for target-based advertising. Nevertheless, consumers’ unfavorable disposition, particularly toward advertising, has hit industry participants hard. Further, the growing consumer preference for digital and subscription services instead of linear pay-TV and rental or outright purchase has compelled industry players to alter their business models. Cable television companies are now offering a variety of alternative packages, including skinny bundles, which are delivered at lower costs than traditional offerings. These companies are also innovating in terms of original content to be competitive against streaming service providers.
High-Speed Internet Demand Key Catalyst: The growing demand for high-speed Internet, including broadband, has aided cable television industry participants like Comcast and Charter. Improving Internet speed is fueling the demand for high-quality video and the trend of binge viewing. Further, a strengthening broadband ecosystem in international markets, along with the proliferation of smart TVs, is anticipated to drive growth. Also, the work-from-home trend and online learning have boosted Internet usage, thus supporting industry participants.
Cord Cutting and Matured PayTV Industry Hurting Prospects: The cable television industry is witnessing the rapid evolution of distribution platforms as well as embracing new players and advanced technologies. Declining profits of residential video services due to rising programming costs and retransmission fees have made survival difficult for traditional companies. Additionally, the heightened need for on-demand content has led to the mushrooming of streaming service providers, making it particularly tricky for traditional cable television companies to maintain a viewer base. Furthermore, the traditional pay-TV industry is maturing with widespread consolidation. Moreover, residential voice service revenues are declining due to the rising shift to wireless voice services.
Softness in Advertising Demand Impeding Business Growth: Persistent inflation and higher interest rates are having a detrimental effect on ad spending. Besides, the challenge with TV ads is that marketers have difficulty getting actionable metrics and insights, such as attribution data. At this time, marketers must look for outside-the-box solutions to extract conversion data from offline media. TV has taken a secondary role in most marketing strategies due to the growing influence of digital marketing. Many marketers are increasing ad spending on digital media due to their unmatched ability to deliver personalized messages that are easy to measure. Cable TV players are set to face competition for ad dollars from streaming service providers like Netflix and Disney, which are raising prices and introducing cheaper ad-supported packages now that their subscriber growth has slowed.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Cable Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #215, which places it in the bottom 11% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2024, the industry’s earnings estimate for 2025 has moved south by 9.6%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Cable Television industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year.
The industry has declined 41.3% over this period compared with the broader sector’s decrease of 3.3%. The S&P 500 has risen 14.8% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, a commonly used multiple for valuing cable companies, we see that the industry is currently trading at 6.3X compared with the S&P 500’s 18.25X and the sector’s 10.17X.
Over the past five years, the industry has traded as high as 16.19X, as low as 6.26X and at the median of 7.75X, as the chart below shows.
EV/EBITDA Ratio (TTM)
2 Cable Stocks to Watch
Naspers: Naspers offers compelling near-term upside through its 26% stake in Tencent, China's digital ecosystem leader. Recent Chinese regulatory tailwinds and stimulus measures support Tencent's recovery in gaming and advertising revenues. Naspers' e-commerce portfolio, including iFood and Takealot, demonstrates accelerating profitability improvements with clear paths to sustainable earnings. The company's aggressive share buyback program directly unlocks value by narrowing its persistent holding company discount. Management's strategic focus on operational efficiency across all segments positions Naspers to capture growth in high-potential emerging markets while benefiting from Tencent's renewed momentum in AI integration and international expansion initiatives.
Shares of this Zacks Rank #2 (Buy) company have surged 52.1% year to date. The consensus mark for fiscal 2026 earnings has been revised upwards by 5.4% to 97 cents per share in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: NPSNY
WideOpenWest: This Zacks Rank #3 (Hold) company presents compelling fundamentals for near-term attention. The company's strategic fiber network expansion enhances competitive positioning in high-speed broadband markets. Recent operational improvements demonstrate management's ability to stabilize the business while reducing customer churn. WOW's focus on high-margin fiber subscribers over legacy cable customers positions it well for sustainable growth. The company's targeted market approach in underserved areas offers less competition than major metropolitan markets. Additionally, ongoing network upgrades improve service quality and customer retention. WideOpenWest's debt refinancing efforts strengthen its balance sheet, providing financial flexibility for continued infrastructure investments and market expansion opportunities.
WideOpenWest’s shares have returned 3.8% in the year-to-date period. The Zacks Consensus Estimate for 2025 loss has widened to $1.06 per share from 78 cents per share in 60 days’ time.
Price and Consensus: WOW
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2 Stocks to Watch From a Challenging Cable Television Industry
The Zacks Cable Television industry players are focusing on bundled offerings and on-demand programming to counter challenges from cord-cutting as consumers shift away from traditional pay-TV options, including cable TV and satellite TV, to over-the-top streaming services with innovative content. The industry is evolving by leveraging its broadband infrastructure to meet changing consumer preferences and balancing traditional cable services with new streaming options to maintain relevance in the rapidly changing media landscape. Cable companies are benefiting from consistent demand for high-speed broadband and WiFi devices, driven by hybrid work and learning environments. Increased media consumption has been a key catalyst for industry leaders like Naspers (NPSNY - Free Report) and WideOpenWest (WOW - Free Report) .
Industry Description
The Zacks Cable Television industry comprises companies offering integrated data, video and voice services, including pay-TV and Internet-based streaming content. These firms provide equipment like satellite dishes, digital set-top receivers and remote controls. Cable companies typically build or lease network backbones from telecom companies and purchase licenses to distribute programmers' content over these networks. They license content from programmers and sell advertising spots. The industry is capital-intensive, requiring significant investment in infrastructure, and is heavily regulated by the Federal Communications Commission. Industry players must balance the need for ongoing investment in technology and infrastructure with evolving consumer preferences and regulatory compliance to maintain competitiveness in the media landscape.
4 Trends Shaping the Future of the Cable Industry
Skinny Bundles, Original Content Driving Growth: Cable television’s ability to generate ad revenues outside traditional TV platforms, such as websites and any digitally-consumed platform, provides increased scope for target-based advertising. Nevertheless, consumers’ unfavorable disposition, particularly toward advertising, has hit industry participants hard. Further, the growing consumer preference for digital and subscription services instead of linear pay-TV and rental or outright purchase has compelled industry players to alter their business models. Cable television companies are now offering a variety of alternative packages, including skinny bundles, which are delivered at lower costs than traditional offerings. These companies are also innovating in terms of original content to be competitive against streaming service providers.
High-Speed Internet Demand Key Catalyst: The growing demand for high-speed Internet, including broadband, has aided cable television industry participants like Comcast and Charter. Improving Internet speed is fueling the demand for high-quality video and the trend of binge viewing. Further, a strengthening broadband ecosystem in international markets, along with the proliferation of smart TVs, is anticipated to drive growth. Also, the work-from-home trend and online learning have boosted Internet usage, thus supporting industry participants.
Cord Cutting and Matured PayTV Industry Hurting Prospects: The cable television industry is witnessing the rapid evolution of distribution platforms as well as embracing new players and advanced technologies. Declining profits of residential video services due to rising programming costs and retransmission fees have made survival difficult for traditional companies. Additionally, the heightened need for on-demand content has led to the mushrooming of streaming service providers, making it particularly tricky for traditional cable television companies to maintain a viewer base. Furthermore, the traditional pay-TV industry is maturing with widespread consolidation. Moreover, residential voice service revenues are declining due to the rising shift to wireless voice services.
Softness in Advertising Demand Impeding Business Growth: Persistent inflation and higher interest rates are having a detrimental effect on ad spending. Besides, the challenge with TV ads is that marketers have difficulty getting actionable metrics and insights, such as attribution data. At this time, marketers must look for outside-the-box solutions to extract conversion data from offline media. TV has taken a secondary role in most marketing strategies due to the growing influence of digital marketing. Many marketers are increasing ad spending on digital media due to their unmatched ability to deliver personalized messages that are easy to measure. Cable TV players are set to face competition for ad dollars from streaming service providers like Netflix and Disney, which are raising prices and introducing cheaper ad-supported packages now that their subscriber growth has slowed.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Cable Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #215, which places it in the bottom 11% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2024, the industry’s earnings estimate for 2025 has moved south by 9.6%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Cable Television industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year.
The industry has declined 41.3% over this period compared with the broader sector’s decrease of 3.3%. The S&P 500 has risen 14.8% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, a commonly used multiple for valuing cable companies, we see that the industry is currently trading at 6.3X compared with the S&P 500’s 18.25X and the sector’s 10.17X.
Over the past five years, the industry has traded as high as 16.19X, as low as 6.26X and at the median of 7.75X, as the chart below shows.
EV/EBITDA Ratio (TTM)
2 Cable Stocks to Watch
Naspers: Naspers offers compelling near-term upside through its 26% stake in Tencent, China's digital ecosystem leader. Recent Chinese regulatory tailwinds and stimulus measures support Tencent's recovery in gaming and advertising revenues. Naspers' e-commerce portfolio, including iFood and Takealot, demonstrates accelerating profitability improvements with clear paths to sustainable earnings. The company's aggressive share buyback program directly unlocks value by narrowing its persistent holding company discount. Management's strategic focus on operational efficiency across all segments positions Naspers to capture growth in high-potential emerging markets while benefiting from Tencent's renewed momentum in AI integration and international expansion initiatives.
Shares of this Zacks Rank #2 (Buy) company have surged 52.1% year to date. The consensus mark for fiscal 2026 earnings has been revised upwards by 5.4% to 97 cents per share in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: NPSNY
WideOpenWest: This Zacks Rank #3 (Hold) company presents compelling fundamentals for near-term attention. The company's strategic fiber network expansion enhances competitive positioning in high-speed broadband markets. Recent operational improvements demonstrate management's ability to stabilize the business while reducing customer churn. WOW's focus on high-margin fiber subscribers over legacy cable customers positions it well for sustainable growth. The company's targeted market approach in underserved areas offers less competition than major metropolitan markets. Additionally, ongoing network upgrades improve service quality and customer retention. WideOpenWest's debt refinancing efforts strengthen its balance sheet, providing financial flexibility for continued infrastructure investments and market expansion opportunities.
WideOpenWest’s shares have returned 3.8% in the year-to-date period. The Zacks Consensus Estimate for 2025 loss has widened to $1.06 per share from 78 cents per share in 60 days’ time.
Price and Consensus: WOW