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On Monday, Bernstein analysts adjusted their stance on Charter Communications (NASDAQ:CHTR), downgrading the stock from Outperform to Market Perform, albeit with an increased price target to $410 from the previous $385. The reevaluation follows a significant year-over-year increase in the company’s stock value, which has risen approximately 40%, and a year-to-date rise of around 15%, outperforming the S&P 500’s flat movement.
The analysts cited Charter’s strong performance as a reason for taking a step back to reassess, acknowledging the stock’s recent gains as reflective of its current fair value. Despite noting that Charter’s capital expenditures are expected to reach their peak in 2025, with projected cash flow growth beginning in 2026 to support its leveraged buyback program, the analysts have chosen a more cautious outlook. The company maintains a GOOD financial health score according to InvestingPro, which offers 7 additional key insights about Charter’s financial position in its comprehensive Pro Research Report.
Recent concerns about a potential decline in EBITDA for 2025 have eased, with current EBITDA standing at $22.15 billion, contributing to the stock’s current valuation. However, the analysts believe that while there is still some potential for growth, it is not sufficient to maintain a bullish position at this time.
The report also highlighted ongoing challenges for Charter, including the loss of broadband subscribers for nine consecutive quarters, a trend partly exacerbated by the Affordable Connectivity Program (ACP). The timeline for a turnaround to positive net additions remains uncertain, especially with the growth of fiber and fixed wireless access (FWA) as competitive factors.
Telecommunications companies continue to invest in expanding fiber networks, and FWA subscribers are anticipated to nearly double by 2030, reaching approximately 20 million. These industry dynamics, according to the Bernstein analysts, are solidifying a competitive environment that may not shift in favor of Charter Communications in the near future.
In other recent news, Charter Communications has announced its acquisition of Cox Communications for $34.5 billion, a move expected to enhance its operational scale and reduce leverage. Analysts from KeyBanc have maintained an Overweight rating on Charter, citing the anticipated financial benefits from the Cox deal, projecting it to be accretive to Charter’s free cash flow per share by up to 10% in the third year. Fitch Ratings has placed Charter on a positive rating watch, reflecting the expected improvements in structure and leverage post-acquisition.
UBS analysts have kept a Neutral rating on Charter with a $400 price target, noting the potential 10% dilution to free cash flow per share initially, but expecting accretion as synergies are realized. Loop Capital Markets upgraded Charter to Buy, raising the price target to $510, highlighting the positive growth prospects following the merger. The merger is set to expand Charter’s reach to 70 million passings and is expected to stabilize its video segment with expanded carriage agreements.
Charter’s recent initiatives, such as the Life Unlimited rebrand, are also seen as promising, offering combined broadband and mobile services with customer service guarantees. The company’s capital expenditures are projected to peak in 2025, with significant free cash flow growth anticipated by 2026. The integration of Cox’s advanced network infrastructure is expected to further enhance Charter’s competitive position in the telecommunications industry.
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