CS First Boston downgraded Cox Communications (COX) to hold from strong buy.
Analyst Lara Warner says while COX continues to be one of the strongest operators in the industry, downgrades on concerns that high SG&A growth will continue to make margin expansion difficult. She believes high SG&A growth being driven by product installation costs that in past have been capitalized, but going forward must be expensed if it is not first visit to that address. Says, in essence, the cost of churn is hitting P&L. Shhe estimates these costs represented about $12 million in the second quarter, or 300 basis points of SG&A growth.
She cut her 12-month target to $29.