Altice USA: The Huge Debt Burden Is Why I Rate This A Sell

$ATUS - Altice USA: The Huge Debt Burden Is Why I Rate This A Sell. #stockmarket #finance #markets.

Altice USA, The Huge Debt Burden

Altice USA, Inc. (NYSE:ATUS) is a holding company that operates through its subsidiaries. With its well-known brands, such as SuddenLink and Optimum, the company provides broadband communication and video services in the United States. In 2019, the company launched a full-service mobile offering to customers across its footprint.

Currently, the management is focusing on building an FTTH network, which will enable it to deliver multi-gig broadband speeds to comply with rising demand.

Also, residential data and business services contribute significantly to the revenue. As the company has been upgrading its technology and services, the data segment will see a significant improvement in business operations.

With its strong HFC network, the company provides its customers with a high-speed broadband network. The segment also operates in video, telephony, and mobile services. As the management is putting significant efforts into developing the segment, their effort to bring new and innovative technology might help the company to gain a substantial market share in the upcoming years.

The segment offers a wide range of services to large and medium-sized enterprises. With its Lightpath bandwidth connectivity service, the company offers data speed of up to 100GB to its clients.

These business segments have been producing considerable profits for the company. The business model seems substantially robust as the company has been producing considerable cash flows. Still, in my view, due to its significantly high debt, any bad news can cause a huge stock price correction. Therefore, it is better to avoid companies with significant debt burdens, which bring substantial risk to the business model.

Since its public offering, revenue has increased slightly from $9.3 billion in 2017 to about $10 billion by 2021. Despite posting substantial revenue, the net profit margins have remained significantly volatile. After dropping to $18 million in 2018, net profits have increased to over $990 million till last year. It should be appreciated that management has been focusing on share buybacks; as a result, the share count has come down from 730 million to about 453 million.

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