Why Cable One (CABO) Became a Repeated Short Target?

Prosper Stars & Stripes, a long/short equity fund, recently published its Q2 2026 investor letter, detailing the investment performance of its portfolio. The fund reported a strong net return of +30.1% for Q2 2026, surpassing the Russell 2000 Index's +21.5% and HFRX Equity Hedge Index's +10.3%. Cable One, Inc. (NYSE:CABO), a US-based data, video, and voice services provider, was identified as the second-largest contributor to their short book during that quarter.

The company provides cable broadband in rural markets, where it once had pricing power and high barriers to entry. However, increased competition from fiber overbuilders, fixed wireless, and satellite internet led to a decline in Cable One's market position. In Q1 2026, the company experienced a 7% revenue decline and a 33% earnings decrease.

Management's late recognition of the shift and capital allocation to asset purchases at peak multiples exacerbated the situation. Cable One's falling prices, combined with subscriber losses and leverage, have put pressure on margins and threatened the company's long-term value. Prosper Stars & Stripes did not cover their position in Cable One, Inc. (NYSE:CABO) for the quarter.

While acknowledging the company's potential as an investment, they believe AI stocks offer greater upside potential with less downside risk.