Morgan Stanley Upgrades Time Warner Cable; Sees Future Growth (TWC)

Video services company, Time Warner Cable Inc (TWC) was upgraded to “Overweight” by Morgan Stanley.

Morgan Stanley has reaffirmed their rating of “Overweight” for TWC and raised their price target from $110 to $113. This new price target suggests a 12.9% increase over the stock’s current price of $98.36 on Monday, and a 43.7% increase over the stock’s YTD price of $63.57.

Analysts at Morgan Stanley commented, “We are raising our PT to $113 as the recently announced modem lease fee drives an upward revision to our estimates. We now forecast TWC to grow ’13 EBITDA at the high end of peers, compared to the low end prior (Exhibit 1), on what we believe are still conservative assumptions. Our OW thesis continues to be based on 1) management’s capital allocation discipline, 2) above consensus EPS for ’13, and 3) TWC as the best way to play the U.S. consumers’ growing data usage (wired & wireless/wifi) and cable’s advantage over DSL. Our $113 YE13 PT implies TWC’s fwd FCF yield holds relatively constant at 9% (disc. to peers). Catalysts include rising buybacks in 2H12 and an expected dividend hike of 10%+ in ’13.”

Time Warner Cable shares were up $1.53, or 1.58% on Monday.

The Bottom Line
Shares of Time Warner Cable (TWC) have a 2.31% dividend yield, based on Friday’s closing stock price of $96.86. The stock has technical support in the $92-$94 price area. The shares are trading near all-time highs.

Time Warner Cable Inc (TWC) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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