Raymond James downgraded WideOpenWest (WOW) to Underperform, citing limited upside potential following the proposed acquisition.
The company received a non-binding offer of $4.80 per share from its major shareholders and affiliates, which is in line with Raymond James’ previous target price of $5. However, the stock is currently trading above the offer price.
While Raymond James doesn’t rule out a higher bid, they are skeptical because of potential “hidden costs” to the buyer related to WideOpenWest’s legacy infrastructure upgrades. These costs could dampen the acquisition multiples.
Analysts do not see any major regulatory hurdles that could delay the deal, expecting only routine license transfers and utilities approvals.
Given the current stock price exceeding supply and better opportunities elsewhere, analysts at Raymond James see limited upside potential for WideOpenWest stock. They maintain their 2024 and 2025 estimates but downgrade them to Underperform.
Furthermore, analysts at Raymond James highlight WideOpenWest’s current valuation at 5.5x EV/EBITDA for 2025 estimates. This is below typical private market valuations in the 9-12x range and even the sale of the company’s private assets to lower quality markets at 11x in 2021.