Altice USA, Inc. (ATUS) shares rose more than 1.5% during pre-market hours on Monday after Raymond James raised its price target from $35.00 to $42.00 per share.

Key Takeaways

  • Altice USA shares moved higher after Raymond James raised its price target from $35.00 to $42.00 per share.
  • Analyst Frank Louthan believes that COVID-19 has decelerated the pace of cord-cutting, which could pave the way to free cash flow growth.
  • The stock continues to trade at overbought levels with a relative strength index (RSI) reading of 76.27, which suggests that there may be some near-term consolidation.

Raymond James analyst Frank Louthan believes that the pandemic has decelerated the pace of cord-cutting and could continue to do so over the next couple of quarters, which could pave the way toward greater free cash flow growth. The firm reiterated its Strong Buy rating and raised its price target to $42.00 – a 16.6% premium over Friday's closing price.

Earlier this month, JPMorgan put out a report suggesting that big cable stocks could benefit from strong fundamentals driven by the pandemic. The firm gave the three top publicly traded cable companies Overweight ratings, including a $40.00 price target for Altice, citing its strong free cash flow yield as a catalyst for the bullish sentiment.

Chart showing the share price performance of Altice USA, Inc. (ATUS)
TradingView.com

From a technical standpoint, the stock reached fresh highs during Monday's session. The relative strength index (RSI) continues to trend in overbought territory with a reading of 76.27, while the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see some near-term consolidation before experiencing any sustained move higher.

Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.

Traders should watch for consolidation between the stock's current highs and the 50-day moving average at $31.67, where it would also close its recent gap. If the stock breaks down, traders could see a move to trendline support at around $30.27. If the stock breaks out higher, traders should watch for a move to fresh highs.

The Bottom Line

Altice USA shares extended their rally after Raymond James raised its price target to $42.00 per share, saying that the pandemic could decelerate the pace of cord-cutting and pave the way to free cash flow growth. That said, the stock remains at overbought levels and could have limited upside potential before a period of consolidation.

The author holds no position in the stock(s) mentioned except through passively managed index funds.