Shaw Communications Tops 4Q Estimates, Adds 60,000 Wireless Subscribers

Shaw Communications reported better-than-expected 4Q results, as the telecom company added 60,000 (45,000 postpaid subscribers and 14,900 prepaid subscribers) customers in its wireless business during the reported period.

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Shaw Communications (SJR) said that the increase in retail traffic along with strong demand from western Canadians for Shaw Mobile led to the subscriber growth, despite competition and a less active back-to-school season amid the COVID-19 environment. The company’s wireless postpaid churn increased to 1.57% in the August-ending quarter from 1.47% in the year-ago quarter.

Meanwhile, 4Q revenues remained flat at C$1.35 billion year-over-year but beat analysts’ expectations of C$1.01 billion. 4Q earnings of C$0.34 exceeded the Street estimates of C$0.22 per share and increased by 6.3% year-on-year.

The company expects consolidated capital investments of approximately $1 billion and free cash flow of about $800 million for fiscal 2021. Shaw Communications said “While the financial impacts from COVID-19 in the second half of fiscal 2020 were not material, the situation is still uncertain in terms of its magnitude, outcome, duration, resurgence and/or subsequent waves. (See SJR stock analysis on TipRanks).

On Oct. 23, Morgan Stanley analyst Simon Flannery initiated coverage on the stock with a Hold rating and a price target of C$25 or $18.76 (13.7% upside potential). The analyst sees attractive growth opportunities in wireless business and notes that the company has potential for broadband upside. However, he believes that rival Telus is better positioned and that there is pressure on Shaw’s “large” pay TV segment.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 5 Buys and 2 Holds. The average price target of $20.58 implies upside potential of about 24.7% to current levels. Shares have decreased by about 18.7% year-to-date.