KeyBanc cuts Cable One stock rating following Q1 misses

On Friday, KeyBanc Capital Markets adjusted its stance on Cable One (NYSE:CABO), downgrading the company’s stock from Overweight to Sector Weight due to a series of underwhelming financial results in the first quarter of 2025. The stock, currently trading at $262, has declined nearly 32% over the past year and appears undervalued according to InvestingPro analysis. The downgrade was prompted by Cable One’s disappointing performance, which included a decline in high-speed data (HSD) net additions by 10,000, a 3.1% year-over-year drop in average revenue per user (ARPU), and an adjusted EBITDA of $796.8 million that fell short of the consensus estimate by approximately 2%. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with a healthy gross profit margin of 73.6% and liquid assets exceeding short-term obligations.

The firm noted that while Cable One’s management has indicated confidence in their ability to increase both HSD net additions and revenue throughout 2025, the recent execution issues have cast doubt on the credibility of this guidance. Despite previous optimism due to the company’s attractive valuation and potential for subscriber growth thanks to its low market penetration, the recent trend of negative results has led to a more cautious outlook from KeyBanc.

The analyst from KeyBanc expressed that the downgrade was a result of the cumulative impact of various negative factors, including increased customer churn, billing credits issued during the quarter, and a generally lower rate of new customer connections. These issues were referred to as "one-time bad guys" in the commentary, suggesting that they may not be indicative of long-term problems. According to InvestingPro, which offers comprehensive analysis of 1,400+ US stocks through its Pro Research Reports, Cable One has maintained dividend payments for 11 consecutive years and offers a notable dividend yield of 4.5%, demonstrating long-term financial stability despite current challenges.

To regain confidence in Cable One’s strategic decisions, KeyBanc indicated that it would require evidence of several consecutive quarters of improved trends. The firm’s previous Overweight rating was held on the belief in the company’s growth potential, but the recent performance has necessitated a reevaluation of that position.

Cable One’s management remains committed to turning around the trajectory of HSD net additions and revenues in the current year. However, the recent operational missteps have led to skepticism from analysts about the company’s ability to meet its stated objectives. KeyBanc will be closely monitoring Cable One’s performance in the upcoming quarters to determine if the company can demonstrate a consistent pattern of improvement.

In other recent news, Cable One Inc . reported disappointing first-quarter earnings for 2025, with earnings per share (EPS) significantly missing projections at $0.46, compared to the expected $8.84. Revenue also fell short of expectations, reaching $380.6 million against the anticipated $387.52 million. The company experienced a year-over-year revenue decline from $404.3 million in the same quarter last year. Notably, Cable One’s net income dropped to $2.6 million from $37.4 million in the previous year. Amid these financial challenges, the company has suspended its dividend as part of a strategy to reduce debt. Analysts have noted the company’s new product launches aimed at addressing market challenges. Despite the earnings miss, Cable One’s leadership remains optimistic about future residential broadband revenue growth. The company plans to maintain capital expenditures in the low $300 million range and focus on strategic initiatives to enhance financial performance.

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