UPDATED: To correct Comcast's stock performance.
Cable looks like a decent place to park your money in the event of a catastrophic market meltdown. The logic is this: People like TV. They don't want to give it up even if the economy is going to hell in a handbasket. Actually, they may be less willing to sacrifice it in a recession, according to some Wall Street analysts. And even if cable operators won't grow gangbusters, they may not bleed subscribers -- unlike other businesses.
"Generally speaking, incumbent cable providers are better protected [from the economy] than other businesses for a couple reasons. The only competitive pressures they have are coming from Verizon and AT&T, and they don't have the scale to pose a serious threat yet," says Chris King, an analyst with Stifel Nicolaus. "And as Americans, we would rather cut off our arms than cut off our TV service."
In a major market downturn, there aren't many sectors that will escape unscathed. And there's some expectation that if people are forced to trim spending, they will give up premium cable TV services such as HBO. But generally speaking, cable providers have proven more resilient to the market downturn than telecom competitors. (Both AT&T and Verizon posted dismal broadband growth last quarter, before this little financial crisis really took hold of the market.)
And among all the cable players, Comcast, like a cockroach, is perceived as a tough company and a safe bet in an economic storm, says Bernstein Research analyst Craig Moffett. But that also means that the stock is a little rich -- or at least it was before the market opened today.
"Cable stocks are enjoying a banner year in this extraordinarily tough market," says Moffett. "But there has been much more separation between the cable stocks than in prior years ... And for many investors, Comcast is the cable industry."
In theory, investors like Comcast better than Time Warner Cable because it's not being chased out of New York City by Verizon, which is in the process of rolling out FiOS, a high-speed fiber internet and television service throughout the city.
Another reason why Time Warner Cable may be cheaper than Comcast: Wall Street thinks that the company's financial goals are a little aggressive, which means it could disappoint, and that means the stock is cheaper.
Of course, Time Warner Cable may have looked cheaper yesterday. As of Tuesday's close, Time Warner Cable shares were down 3.3 percent for the year-to-date, while Comcast shares were up 13.2 percent for the same period.
"Cable isn't going to be immune from the general market, but [the industry] has performed better than telecom," says King.
Photo courtesy Comcast
