WideOpenWest Inc. (WOW), which does business under the brand name WOW! Internet, Cable & Phone, is a broadband provider offering a portfolio of services, including high-speed Internet services, cable television, phone, business data, voice and cloud services to 846,300 subscribers in 19 Midwest and Southeast states.
The coronavirus pandemic saw WOW! expanding its service offerings to business professionals and consumers who found themselves moored at home. In September, the company debuted its Business Home Office solution for small businesses and teleworkers adjusting to remote work structures. In October, it joined the ACA Connects and EducationSuperHighway’s “K-12 Bridge to Broadband” program to help school districts and states provide internet access for students in low-income households.
But perhaps WOW’s most dramatic achievement in 2020 was WOW! tv+, an Android TV-based platform that combined live channel packages, a cloud DVR, and access to third-party streaming apps like Netflix through the Google Play store. WOW premiered the platform in March in Columbus, Ohio, and by the end of December, WOW! tv+ was available in nearly 95% of its services footprint.
WOW was founded in 1996 and is headquartered in Englewood, Colorado. It had an initial public offering in May 2017 that raised about $310 million from 18.24 million shares that were priced at $17 each, though this was below its projected goal of 19.05 million shares at for $20-$22 per share.
Here’s how our proprietary POWR Ratings system evaluates WOW:
Trade Grade: A
WOW is trading at $10.72, closer to its 52-week high of $11.14 than its 52-week low of $2.95. The stock tumbled with the rest of the market in March with the tumult created by the pandemic and mostly ebbed and flowed during the year until it launched into a steady ascent in November, following the release of its Q3 earnings.
Chart Provided by TradingView.com
Buy & Hold Grade: A
The stock’s proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, and its proximity to that level over the past 12 months plays in its favor. The company’s Q3 results, while imperfect, still had much to offer investors.
During WOW’s Q3, total revenue increased $3.3 million, or 1.2%, to $288.7 million, while its total subscription revenue came in at $269.5 million, up $7.1 million, or 2.7%, year-over-year. Although operating expenses (excluding depreciation and amortization), which totaled $140.8 million, increased 1.4% year-over-year, that was primarily due to increases in hardware and software expenses during the pandemic period.
On the downside, Q3’s net income of $9 million was down from the $11.4 million in the previous year, while the diluted earnings per share of $0.11 was three cents below the $0.14 from Q3 2019. And its Adjusted EBITDA of $113.5 million was $700,000 or 0.6% lower than the previous year’s results.
CEO Teresa Elder used her Q3 earnings call to explain her industry was in the midst of a seismic shift “from the traditional video business toward an ever-growing number of streaming alternatives while becoming more reliant on high-speed data to support the plethora of daily activities that are now at their fingertips from IP-based video solutions to supporting the vast amount of people now working and learning from home to IoT products and gaming.”
Elder also noted that during Q3, “Customers buying our high-speed data-only product represented 87% of total new subscribers – this is a significant increase from the same period last year when 60% of new subscribers purchased our high-speed data-only service. This statistic has continued to improve each successive quarter from 66% in Q1, 77% in Q2 and 87% of new subscribers in Q3.”
Peer Grade: A
WOW is ranked #4 out of 13 stocks in the Entertainment – TV & Internet Providers industry. Although it is a relatively small industry, WOW’s high ranking is deserving of respect.
Industry Rank: B
The Entertainment – TV & Internet Providers industry ranks #60 out of 123 stock industries and has an average POWR Rating of “B.”
Overall POWR Rating: A
WOW checks all the right boxes and earns an “A” (Strong Buy) grade.
Bottom Line
During the Q3 earnings call, Chief Financial Officer John Rego opined, “We believe that our adjusted EBITDA and EBITDA margin will continue to improve as our high-speed data business grows relative to the decline in video and telephony.”
Also, during that call, CEO Elder acknowledged WOW is holding its own against much larger competition with a nationwide presence, stating, “I would say that we feel very good about our network and our team's ability to compete against all of those, and continue to maintain or grow our share in penetration. We don't give detailed share information across our categories, but I can tell you that we continue to be pleased with the trends that we're seeing.”
WOW may not be as nationally prominent as other companies in its category, but its numbers affirm it is a serious player worth following.
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WOW shares were trading at $11.37 per share on Thursday afternoon, up $0.65 (+6.06%). Year-to-date, WOW has gained 6.56%, versus a 1.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Phil Hall
Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series. He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output.
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