Altice USA Inc. (ATUS) is engaged in the telecommunications, media and entertainment business. The company operates in two segments: Cablevision and Cequel. The company provides residential and business services across 20 states, digital cable television, high-speed Internet, voice and data products and services. It also provides hyper-local news and programming created specifically for the communities. Its brands include Suddenlink, Optimum, Lightpath, Altice Media Solutions and News 12 Networks.

The company, which is the U.S. business of international media and communications group Altice N.V., went public in an IPO at $30 per share on June 22, 2017. Altice USA’s stock trades on the NYSE under the ticker ATUS. At the closing of the IPO, Altice N.V. (the parent) had a 70.2% interest in Altice USA (the spin-off). On Jan. 8, 2018, Altice N.V. announced a plan to spin off its 67.2% interest in Altice USA through a stock distribution. The spin is expected to take place in May 2018. 

Despite strong revenue growth and impressive EBITDA (earnings before interest, taxes, depreciation and amortization) margin expansion, Altice USA’s valuation post-IPO has taken a beating due to ongoing challenges at the parent company’s operations, casting a shadow on the U.S. subsidiary. Currently, Altice USA is trading at $20.73 per share ($15.2 billion market cap as of Feb. 7). 

We say the spin-off should help get rid of the overhang that has plagued Altice USA. The United States unit has displayed resilience in its video unit with its Altice One video hub and is positioned to expand its broadband business. Altice USA is the fourth-largest U.S. cable operator with 3.4 million video subscribers, behind Comcast (22 million), Charter (16.5 million) and Cox (4 million). Residential video generates about 45% of company revenues, with about 25% from broadband and 23% from voice and business services. 

We value Altice USA at $30 per share. This suggests a 45% upside from the current stock price of $20.73.