Management at Shaw Communications (Shaw Communications Stock Quote, Chart, News: TSX:SJR.B) should be credited for its recent strategic moves and investments, but the company faces competitive pressure that may challenge its growth, says Echelon Wealth Partners analyst Rob Goff.
On Friday, Shaw reported its Q3, 2016 results. The company earned $704-million on revenue of $1.28-billion, a 13 per cent increase over the same period last year.
“We continue to make significant progress in our journey to becoming an enhanced connectivity provider,” said CEO Brad Shaw. “Our third quarter financial and operating results include a full-quarter contribution from Wind Mobile, our new wireless division, and we are pleased to confirm that during the quarter we surpassed over one million wireless subscribers. We also completed the first critical step in our wireless network upgrade. All 3G equipment in Western Canada has now been replaced with Nokia equipment which enables us to increase speeds and throughput as well as put to use an additional 10 megahertz of AWS-1 spectrum to significantly enhance performance. Our path towards an LTE network is currently under way and we expect to have this completed by the end of fiscal 2017.”
Goff says Shaw’s Q3 bottom line was a modest beat of his expectations, but the revenue number was a slight miss. The analyst says by extending LTE with full 1 Gig broadband and X1 coverage, Shaw will find itself with greater competitive weapons over the next 12-16 months. But the analyst also sees a lot of competition for the same dollars.
“We look for limited consumer EBITDA growth while Shaw introduces its new services,” says the analyst. “This view includes wireless where it is considered a growth platform where planning extends beyond quarterly profit optimization. Given the secular pressures on wireline telephony and video, we caution that growth may be challenged by competitive pressures. We are pleased Shaw’s is positioned to contribute double digit growth fuelled by industry growth and internal capacity additions.”
In a research update to clients Friday, Goff maintained his “Hold” rating and one-year price target of $26.00 on Shaw Communications, implying a return of 9.3 per cent at the time of publication.