Can Netflix Have a Positive Impact On Time Warner Cable?

TWC: Time Warner Cable logo
Time Warner Cable


Netflix (NASDAQ:NFLX), Google’s (NASDAQ:GOOG) Youtube and others have made the Internet an important channel for media companies due to the popularity of video streaming services. Time Warner Cable (NYSE:TWC) and Comcast (NASDAQ:CMCSA) now face an obstacle on how to respond to this threat as more customers watch video online. There are two ways to handle this situation and gain from it: Gain more control over the content that is being watched on its broadband network or resort to a broadband pricing that will take advantage of how much one uses this channel. Several proponents of the latter option have recently mentioned this including Sanford C. Bernstein & Co.’s analyst Craig Moffet.  How will this impact Time Warner Cable?

Our price estimate for Time Warner Cable stands at $70.62, implying a premium of more than 15% to the market price.

See our full analysis for Time Warner Cable

Relevant Articles
  1. Time Warner Cable Q1 Review: High-Speed Data Leads Revenue Growth, Company Gains Pay-TV Subscribers
  2. How Are Time Warner Cable’s Revenue & EBITDA Composition Expected To Change By 2020?
  3. What Has Led To A ~20% Increase In Time Warner Cable’s Revenues & EBITDA In The Last Five Years?
  4. How Has Time Warner Cable’s Revenue Composition Changed In The Last Five Years?
  5. How Much Can Time Warner Cable’s Revenues Grow Over the Next Five Years?
  6. What’s Time Warner Cable’s Fundamental Value Based On Expected 2016 Results?

We estimate that Time Warner Cable’s broadband business is single-most important business for the company, constituting about 42% to its value. The company’s management’s words essentially echo our estimates.

The company sees itself primarily as a broadband provider, bundling some extra services such as pay-TV for customer convenience. That said, any change to the pricing is likely to have notable impact on company’s value, and therefore to its stock. Assuming that a tiered pricing is implemented and brings in more revenue per broadband subscriber, the company’s results could improve. We believe that our fee per broadband subscriber forecast incorporate increasing penetration of high speed packages, but it could change if the company was to charge higher or implement a tiered pricing for high usage.

For instance, if fee per broadband subscriber rises 10% above current forecast, there could be an upside of about 10% to our price estimate. Whether this will happen or not, will depend on the structure of possible new pricing. But if it does, it can materially increase the value of the firm.

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