Rogers Communications is undervalued, says Echelon Wealth Partners

A new partnership between Rogers (Rogers Communications Stock Quote, Chart, News: TSX:RCI.B) and Comcast is getting the thumbs up from Echelon Wealth Partners analyst Rob Goff.

On Friday, Rogers announced a long term partnership with Comcast that will see the Canadian telco deploy Comcast’s X1 IP-based video platform.

“This partnership is great news for our customers,” said Rogers interim CEO Alan Horn. “We’re bringing our customers a world-class IPTV service with the most advanced features available in the market today. On top of that, our customers will be future-proofed thanks to Comcast’s innovative and robust product road map.”

Goff says that while he wishes the service could be deployed more quickly, he thinks it is a strong move.

“This partnership marks the end of Rogers’ attempts to organically produce an IPTV product, instead allowing it to benefit from the wealth of R&D and the strong product roadmap that Comcast has amassed,” says the analyst. “Rogers sees some measure of security in a hosted platform model where Comcast is recognized for the strength of its field-tested, user-proven, next-generation product. We view the partnership positively given Comcast’s demonstrated capability and market clout. While we are disappointed that the new service will not be launched until 2018, it clearly takes on a much lower risk profile while ensuring access to Comcast’s current and future services.”

In a research update to clients today, Goff maintained his “Buy” rating and one-year price target of $60.00 on Rogers Communications, implying a return of 21.5 per cent at the time of publication.

Goff believes Rogers will generate Adjusted EBITDA of $5.11-billion on revenue of $13.78-billion in fiscal 2016. He expects these numbers will improve to EBITDA of $5.15-billion on a topline of $14.04-billion the following year.