A major Wall Street analyst covering the cable TV industry dropped her rating on the sector, citing factors such as competition in the high-speed data business and overoptimistic free cash flow estimates.

The analyst, Credit Suisse First Boston's Lara Warner, also cut her price targets on Comcast ( CMCSA) and Cox ( COX), two of the biggest players in the cable business.

Warner's report spotlighted an incrementally pessimistic outlook on issues that have dogged cable stocks for years, and will continue to do so: competition from regional Bell operating companies and skepticism over whether cable operators can cut capital expenditures and increase free cash flow.

Cable stocks generally traded lower Tuesday, but not by much. Comcast's shares were trading at $30.60 Tuesday afternoon, down 6 cents, while Cox dropped 31 cents to $32.54.

In her report, Warner says several "negative catalysts" may drive cable stocks lower over the next 12 months, starting with new sources of competition in the areas of broadband Internet, video and telephony. New competitive pressures, greater-than-expected capital expenditures and higher cash tax burdens, writes Warner, will drive lower-than expected free cash flow -- usually defined as cash flow from operations after interest expense and capex have been subtracted out.

Finally, the cable industry's increasing participation in network-based services, increasing competition from RBOCs and slower growth all will invite comparisons to telecom stocks rather than media stocks, says Warner -- a trend "likely to create on-going pressure on valuations," she says.

Warner's views on the cable sector today don't match up to the prevailing assumptions held by cable investors nine to 12 months ago, she writes. Back then, the industry appeared to be moving in a positive direction, she writes: "new products generating incremental revenue with older products exhibiting pricing power, programming expense pressure expected to begin to ease, and investment requirements declining."

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