With shares of Time Warner Cable (NYSE:TWC) trading around $708, is TWC an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Time Warner Cable is a provider of video, high-speed data, and voice services in the United States, with systems located in five geographic areas: New York, the Carolinas, Ohio, Southern California, and Texas. The company offers its residential and business services customers numerous services over its broadband cable systems. With such a large and growing user base, look for Time Warner Cable to continue to see rising profits from its media, entertainment, and communications offerings.
In recent news, 21st Century Fox (NASDAQ:FOXA) said that its new network, Fox Sports 1, a 24-hour sports network, will launch Saturday as planned, with all major distributors including Time Warner Cable on board, as well as 90 million subscribers. Also, Charter Communications (NASDAQ:CHTR) is teaming up with Goldman Sachs (NYSE:GS) to try and buy Time Warner Cable. And Time Warner Cable is reportedly still in negotiations to acquire a 25 percent take in Hulu LLC, even after Hulu’s owners announced the site was not for sale.
T = Technicals on the Stock Chart Are Strong
Time Warner Cable stock has been moving higher in recent years. The stock is trading at all-time high prices and does not see any significant signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Time Warner Cable is trading slightly above its rising key averages, which signals neutral to bullish price action in the near term.
Source: Thinkorswim
Taking a look at the implied volatility and implied volatility skew levels of Time Warner Cable options may help determine if investors are bullish, neutral, or bearish.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| Time Warner Cable Options |
29.38% |
3% |
1% |
What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.
|
Put IV Skew |
Call IV Skew |
|
| September Options |
Flat |
Average |
| October Options |
Flat |
Average |
As of Friday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.
E = Earnings Are Rising Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Time Warner Cable’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Time Warner Cable look like and more importantly, how did the markets like these numbers?
|
2013 Q2 |
2013 Q1 |
2012 Q4 |
2012 Q3 |
|
| Earnings Growth (Y-O-Y) |
14.69% |
11.67% |
-3.74% |
140.70% |
| Revenue Growth (Y-O-Y) |
2.70% |
6.64% |
9.85% |
9.20% |
| Earnings Reaction |
3.16% |
-0.58% |
-11.28% |
-6.35% |
Time Warner Cable has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Time Warner Cable’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has Time Warner Cable stock done relative to its peers – Comcast (NASDAQ:CMCSA), Dish Network (NASDAQ:DISH), and DirecTV (NASDAQ:DTV) — and sector?
|
Time Warner Cable |
Comcast |
Dish Network |
DirecTV |
Sector |
|
| Year-to-Date Return |
13.11% |
13.54% |
22.20% |
18.74% |
15.43% |
Time Warner Cable has been an average year-to-date performer.
Conclusion
Time Warner Cable provides entertainment, voice, and high-speed data services to a growing customer base in the United States. The company is involved in some acquisition news and continues to expand its networks, which may prove positive. The stock has been trending higher and is now trading near all-time high prices. Over the last four quarters, earnings and revenue figures have been rising, but investors have had mixed feelings about recent announcements. Relative to its peers and sector, Time Warner Cable has been an average year-to-date performer. Look for Time Warner Cable to OUTPERFORM.
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Read the original article from Wall St. Cheat Sheet