NEW YORK (TheStreet) -- Shares of Time Warner Cable (TWC) were down 0.36% to $182.94 in early market trading Wednesday, after Charter Communications (CHTR) - Get Report made a $195 a share takeover bid to acquire its larger rival yesterday.
The $56 billion buyout of Time Warner Cable would mark a huge step toward industry consolidation, Reuters noted.
This morning, analysts at Needham & Co upgraded shares of cable giant Time Warner Cable to "hold" from "underperform" following the announcement of the cable-TV deal on Tuesday.
He added that even though he believes Time Warner Cable will likely go higher, Cramer's method is to take profits in the company that's being acquired and own the acquirer itself.
Last year, Charter bid about $132.50 per share, or $37.3 billion, for Time Warner Cable. However, Comcast (CMCSA) - Get Report swooped in and beat their bid with an all-stock deal worth $158.82 per share, according to Reuters.
Then in April, Comcast gave up on its $45 billion takeover deal of Time Warner Cable after the FCC determined that it would be an anti-competitive deal.
U.S. regulators were concerned that the deal would have given Comcast an unfair advantage in the cable TV and Internet-based services market, Reuters added.
Cramer said he believes the FCC and the Department of Justice got this one wrong, and that they should not have scrapped the deal.
If the acquisition deal is successful, both shares of Time Warner Cable and Charter will likely rise.
New York City-based Time Warner Cable is a provider of video, high-speed data and voice services with clustered cable systems.
The company's services include residential services, high-speed data services, voice services, intelligent-home and business services.
Separately, TheStreet Ratings team rates TIME WARNER CABLE INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TIME WARNER CABLE INC (TWC) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TIME WARNER CABLE INC's earnings per share declined by 6.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TIME WARNER CABLE INC increased its bottom line by earning $7.17 versus $6.71 in the prior year. This year, the market expects an improvement in earnings ($7.25 versus $7.17).
- Net operating cash flow has slightly increased to $1,508.00 million or 7.94% when compared to the same quarter last year. Despite an increase in cash flow, TIME WARNER CABLE INC's average is still marginally south of the industry average growth rate of 15.28%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Media industry and the overall market, TIME WARNER CABLE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: TWC Ratings Report