We downgrade the Canadian cable MSO,
Shaw Communications Inc.
) to Neutral based on the company's high level of current
valuation and growing competitive threat in the Canadian cable TV
Why the Downgrade
The stock price of Shaw Communications surged 29.5% in the
last year, significantly outpacing the S&P 500 return of just
12.1% in the last year. The stock is currently trading at the
high-end of its 52-week price range.
With respect to several valuation metrics, Shaw Communications
is also trading at significantly higher multiples compared to the
S&P 500. We believe the company is currently fairly valued
and the stock price will not provide above market gain any time
soon. Shaw Communications currently has a Zacks Rank #3
Other Causes of Concern
In the first quarter of fiscal 2013, Shaw Communications lost
23,912 basic cable TV subscribers and 4,021 DTH customers. This
indicates that the company's cable operation is facing severe
) popular Optik TV is offering IPTV service, which supports over
400 digital channels with more than 100 HD channels.
It also supports 3D channels and on demand 3D movies along
with Xbox 360, which acts as a secondary set top box, thus
creating a lot of pressure on Shaw Communications' market
Shaw Communications decided to put aside its much-hyped plan
to enter into the wireless market of Canada. Instead, the company
now intends to build a cheaper Wi-Fi network, which will enable
offloading 3G/4G wireless data traffic across a short distance
from landline Internet access points, such as homes, offices,
snacks bars, etc.
We believe the decision of Shaw Communications to abandon its
wireless venture will significantly reduce the company's
competitive strength in a highly lucrative Canadian telecom
Canadian Telecom Stocks that Warrant a Look
While for the time being, we prefer to remain on the sidelines
for Shaw Communications, other Canadian telecom stocks worth a
Rogers Communications Inc.
) and Telus Corp. All these three stocks currently have a Zacks
Rank #3 (Hold).
BCE INC (BCE): Free Stock Analysis Report
ROGERS COMM CLB (RCI): Free Stock Analysis
SHAW COMMS-CL B (SJR): Free Stock Analysis
TELUS CORP (TU): Free Stock Analysis Report
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