Shaw Communications has only modest upside, Canaccord Genuity says

Ahead of the company’s second quarter results, Canaccord Genuity analyst Aravinda Galappatthige says now’s not the time to be a buyer of Shaw Communications (Shaw Communications Stock Quote, Chart, News: TSX:SJR.B).

On Thursday, April 12, Shaw will report its Q2, 2018 results. expects the company will generate EBITDA of $497-million on revenue of $1.24-billion, just below the topline consensus of $1.26-billion. The analyst today detailed his take on how Shaw’s year is shaping up and what he will be looking for from the results.

“Our estimates assume a 2.8% y/y EBITDA decline in H1/F18, which means Shaw would have to generate 13.0% growth in H2/F18 to achieve its 5% EBITDA growth target for F2018,” Galappatthige explains. “While we do expect the recent revisions in pricing/promotions and soft comps to help drive EBITDA growth in H2, we are skeptical of double-digit growth in an environment where TELUS is likely to step up marketing activity alongside its maturing FTTH rollout. Much of Shaw’s success will depend on a turnaround in cable subscriber results with Shaw alluding to neutral to slightly positive video net adds starting in Q3. In wireless, we are interested in signs of accelerating subscriber and ARPU gains. Finally, we will seek an update with respect to Shaw’s voluntary departure program, which saw significantly higher uptake than management had initially expected.”

In a research update to clients today, Galappatthige maintained his “Hold” rating and one-year price target of $28.00 on Shaw Communications, implying a return of 18.6 per cent at the time of publication.

Galappatthige thinks Shaw will generate EBITDA of $2.07-billion in fiscal 2018. He expects that number will improve to EBITDA of $2.18-billion the following year.