Morningstar | Altice’s Turnaround Is Progressing; While 1Q Results Look Weak in Line With Our Expectations
Altice reported first-quarter operational highlights that were in line with our expectations, and we don’t expect any significant changes to our EUR 2.40 per share fair value estimate. We maintain our narrow moat rating and believe the shares are fairly valued.Altice’s turnaround is making progress, as its reported revenue only declined 0.4% year over year with an adjusted EBITDA margin of 36.9%. While these are both below our full-year expectations of 1.2% revenue growth and an EBITDA margin of 37.1%, we expect continued improvement throughout the year, which should lead toward our projections.
In France, the firm's consumer services division continues to grow, as it added 88,000 broadband customers, including 63,000 using its fibre-based service, and 117,000 postpaid wireless subscribers. The French market appears to be stabilising after a very competitive 2018, which should enable Altice to continue to improve its performance.
In Portugal, the turnaround is further behind, as the firm only grew its broadband base by 4,000 customers as copper-based losses almost offset the 41,000 fibre-based gains. However, it did better on the wireless side, adding 33,000 subscribers. We anticipate Altice’s superior broadband network will lead to faster subscriber growth over time.
Altice's international division grew revenue 2%, as Teads revenue jumped 30.2%, and the Dominican Republic’s operation gained 4.6%, but Israel’s declined 4.1%. However, these divisions are relatively small, and the company’s turnaround is primarily dependent on results in France and Portugal. We anticipate the firm will continue to control costs, which will allow further margin expansion as revenue growth returns.
Altice Europe is a provider of cable, fiber, mobile, telecommunications, content and media in Western Europe (comprising France, Portugal, Belgium, Luxembourg1 and Switzerland), the United States of America (U.S.), Israel, the Dominican Republic and the French overseas territories (comprising Guadeloupe, Martinique, French Guiana, La Reunion and Mayotte). Through its various business operations, Co. provides fixed services, mobile telephony services (other than in the U.S.) and media and advertising services to B2C and B2B customers in all of the geographies in which it operates. In addition, Co. offers a variety of wholesale and other services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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