Raymond James downgraded WideOpenWest (WOW) to Underperform, citing limited upside potential following a proposed acquisition.
The company received a non-binding offer of $4.80 per share from its majority shareholder and affiliates, which aligns with Raymond James' previous price target of $5. However, the stock currently trades above the offer price.
While Raymond James doesn't rule out a higher bid, they express skepticism due to potential "hidden costs" for the buyer related to upgrades for WideOpenWest's legacy infrastructure. These costs could suppress the acquisition multiple.
The analysts see no major regulatory hurdles delaying the deal's closure, anticipating only routine license transfers and utility commission approvals.
Given the current price exceeding the offer and better opportunities elsewhere, analysts at Raymond James see limited upside for WideOpenWest stock. They maintain their 2024 and 2025 estimates but downgrade the rating to Underperform.
Furthermore, analysts at Raymond James highlight WideOpenWest's current valuation of 5.5x EV/EBITDA for 2025 estimates. This falls short of typical private market valuations in the range of 9-12x and even the company's own asset sale of lower-quality markets at 11x in 2021.