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Mediacom Stock Rallies on Two Upgrades
Monday May 9, 1:03 pm ET
Mediacom Communications Stock Rallies on Two Upgrades After Co. Reports Smaller Loss


NEW YORK (AP) -- Mediacom Communications Corp. shares rallied on Monday, lifted by two bullish brokerage calls that predicted improving business conditions for the cable television operator after it reported a smaller than expected loss on Friday.
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RBC Capital Markets raised its rating on Mediacom, the nation's 8th biggest cable TV company, to "Sector Perform" from "Underperform" with a $6 price target. Separately, Credit Suisse First Boston boosted its rating on the stock to "Neutral" from "Underweight" and raised its target price to $6.50.

Mediacom shares rose 30 cents, or 5.2 percent, to $6.09 in midmorning trading on the Nasdaq. At that price, the stock has declined slightly more than 2 percent so far this year.

On Friday, Mediacom reported a first-quarter loss of $841,000, or a penny per share, compared with a year-earlier loss of $5.7 million, or 5 cents per share, on revenue of $266.2 million.

The results beat Wall Street's average forecast for a loss of 4 cents per share, the mean estimate of 13 analysts surveyed by Thomson Financial.

Mediacom, which sells services like digital TV, video-on-demand, high-definition TV, digital video recorders and high-speed Internet access in rural areas in 23 states, also reported solid gains in its subscriber base.

Basic subscribers rose by 3,000, the first time basic subscribers increased for two straight quarters in more than two years, Mediacom said. It also added 34,000 more digital customers and 40,000 more data customers, which Mediacom said represented the highest-ever quarterly gains for those categories.

Subscriber growth was better than expected, though average monthly revenue for video and data customers came in slightly less than expected as Mediacom resorted to deeper discounting to lure new customers, RBC said in its note.

However, "we believe the competitive environment is stabilizing, and the company's prospects for margin expansion are improving due to anticipated operating expenditure scale benefits and planned rate increases," the brokerage said.

Separately, Credit Suisse First Boston projected Mediacom's stock price would rise over the next 12 months, particularly in the fourth quarter, since cable stocks typically perform best during the last three months of the year. Additionally, with new services like Voice over Internet Protocol, or Internet phone calling, expected later this year, "we expect performance to improve with each quarter," CSFB said in its note.

However, CSFB also cautioned that Mediacom will still likely report weak subscriber trends in the current quarter, and that earnings before interest and other items would still be negative.





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