Portfolio: Zacks Deep Value

Cable One represents a compelling turnaround opportunity in the rural broadband sector, though one that comes with significant execution risks. Trading at a forward P/E of just 5.86x, the company appears deeply undervalued following its dramatic decline from over $2,000 per share in 2021 to approximately $170 today. However, investors must weigh this potential value against fundamental challenges that have pressured the stock.

The investment case centers on Cable One’s unique strategic position in rural and small-town markets across 24 states, where it serves approximately 1.1 million broadband customers with limited competition. Unlike major operators focused on dense urban markets, Cable One operates in areas with an average of 58,000 homes passed and maintains dominant positions where only one-third of its footprint faces wireline competitors offering high-speed internet above 100 Mbps. This “safe harbor” strategy has historically enabled premium pricing, with residential data ARPU of approximately $85/mo compared to industry averages of $65-70/mo. The company’s recent infrastructure investments have expanded gigabit access to over 90% of its footprint, with plans for multi-gigabit services, providing a technological foundation for defending market share.

However, despite these competitive advantages, Cable One has been facing headwinds. The company lost 121,400 residential data subscribers over two years through Q1 2025, with revenue declining 5.9% year-over-year to $380.6 million in the first quarter. Management also suspended the dividend without warning in May 2025—ending a 14-year streak—to preserve cash for debt reduction amid rising competitive pressures. With $3.5 billion in debt (4.4x EBITDA) and declining cash flows, the balance sheet appears strained. Fixed wireless access (FWA) from T-Mobile and Verizon presents a particularly acute threat given Cable One’s rural footprint and premium pricing, while fiber overbuilds in key markets like Boise and Gulfport could capture significant market share over the next few years. However, we believe the risks are now fully priced into CABO’s valuation, and therefore offers a compelling risk/reward for investors at today’s price if management can execute its multi-year turnaround plan to stabilize subscriber trends and restore growth, making it suitable primarily for value-oriented investors comfortable with elevated execution risk in exchange for potentially substantial returns if the company successfully navigates this challenging period.