Zacks_Analysts' Blog : TWC Enhances Product Offering - Analyst Blog

Time Warner Cable Inc. (TWC), the second largest cable MSO in the U.S., recently announced the inclusion of 37 Spanish language channels on TWCable TV for Apple Inc’s (AAPL) iPad.

Based on the increasing demand for Spanish networks on tablets, the company extended its Spanish channel portfolio and these channels will be free for Time Warner Cable’s customers.

With the growing popularity of tablets and smartphones coupled with the deployment of LTE networks, the customers are shifting their preference of watching their favorite TV shows and games through cable and satellite TV and transitioning to online TV, where they can watch their popular shows whenever they feel.

Another cable giant Comcast Corp. (CMCSA) is set to create history by offering live streaming of America's most popular sporting event "Super Bowl", scheduled to take place on February 5, 2012, on smartphones and tablets.

So looking at the massive popularity of such services, most cable and satellite TV operators have started offering new software for the tablet and smartphone users. These software need to be downloaded on the customers devices, hence allowing better streaming of particular channels.

Solid free cash flow and healthy demand for premium cable services along with strong share buyback program will likely drive the company’s top-line and bottom-line growth. Moreover, the recent deal with Verizon Communication Inc. (VZ) where Time Warner Cable and other cable operators can sell each others plans from their distribution network will reduce the competition as well as boost subscriber growth.

However, huge debt coupled with a rise in programming cost and continuous loss of subscribers will act as headwinds for the company going forward. Moreover, stiff competition from other cable and telecom operators as well as from the newly emerged online video streaming companies will hurt profitability going forward.

We maintain our long-term Neutral recommendation on Time Warner Cable. Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating.