DIRECTV (NASDAQ:DTV) has a long history of share repurchases and has purchased almost $26 billion worth of shares since 2005. With good cash flow, the company recently declared a $4 billion share buyback for 2013 and is expected to be in a position to dedicate $4 billion per year for share repurchases until 2018.
Shift to a digital platform will drive profits higher
Time Warner Cable Inc (NYSE:TWC) reported quarterly results recently and posted $401 million in net income, up 5% from a year ago. Revenue came in at $5.5 billion, up 6.6% year-over-year. The company mainly gets revenue from its monthly subscription fees, advertising and on-demand pay-per-view programming.
In this quarter, the company has seen growth in its broadband and VoIP business, whereas pay-TV remained unimpressive. Time Warner Cable Inc (NYSE:TWC)’s broadband subscribers rose by 131,000 in the quarter due to the acquisition of Insight Communications in 2012 and that number is expected to grow in the future, too.
The gain in subscribers is also the result of the increasing demand for high-speed broadband services. High speed involves high prices and thus has increased the company’s average revenue per user to $46 per subscriber per month in 2012. This growth is expected to continue in the future as Internet users and prices charged alike are likely to increase.
On the other hand, Time Warner Cable Inc (NYSE:TWC) is shifting to a digital platform and giving various introductory offers to customers who are upgrading to digital from analog. Digital services provide higher profits compared to analog, so the company is pushing customers to upgrade to the digital platform.
Under this initiative, the company has partnered with Reality Interactive, a full-service digital-merchandising agency, which has launched eight “experience stores” recently around the US with plans to open nine locations by year end. Reality will serve as the digital media partner for Time Warner Cable Inc (NYSE:TWC), and will provide in-store demonstrations of the company’s digital-media offerings.
Conclusion
Cable television companies are benefiting from the increase in subscription fees, expansions into new markets and new product bases. Comcast, with its X1 set-top box, is attracting new as well as existing customers who will help the company to increase revenue and market share.
DirecTV is gaining traction in the Latin American region by focusing on increasing the pay-TV subscriber base. This has improved the company’s cash flow, which has led to profits for shareholders, as well. Time Warner Cable Inc (NYSE:TWC), with its new offerings in the digital surface, will have higher revenue. Therefore, I recommend buying these three stocks for long-term gains.
The article Three Cable Companies to Bet On originally appeared on Fool.com and is written by Madhu Dube.
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