3 Reasons to Avoid CABO and 1 Stock to Buy Instead

Cable One has gotten torched over the last six months - since January 2025, its stock price has dropped 63.5% to $120.55 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Cable One, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Cable One Will Underperform?

Despite the more favorable entry price, we don't have much confidence in Cable One. Here are three reasons why we avoid CABO and a stock we'd rather own.

1. Inability to Grow Residential Data Subscribers Points to Weak Demand

Revenue growth can be broken down into changes in price and volume (for companies like Cable One, our preferred volume metric is residential data subscribers). While both are important, the latter is the most critical to analyze because prices have a ceiling.

Over the last two years, Cable One failed to grow its residential data subscribers, which came in at 1.04 million in the latest quarter. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Cable One might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Cable One’s revenue to drop by 2.8%. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Cable One historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.2%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Cable One, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 0.8× forward EV-to-EBITDA (or $120.55 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment. We’d recommend looking at our favorite semiconductor picks and shovels play.

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