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On Monday, KeyBanc Capital Markets reiterated its Overweight rating on Charter Communications (NASDAQ:CHTR) with a consistent price target of $500.00. According to InvestingPro data, the stock has shown remarkable momentum with a 15.89% gain over the past week, while trading at an attractive P/E ratio of 10.42x. KeyBanc’s analyst Brandon Nispel expressed confidence in the company’s prospects, citing several positive factors despite a shortfall in broadband subscriber growth.
Nispel noted that while Charter’s broadband subscriber numbers did not meet consensus expectations, average revenue per user (ARPU) saw improvement. Additionally, operating efficiency, bolstered by a one-time benefit, led to EBITDA surpassing consensus estimates. The company maintains strong operational metrics, with InvestingPro reporting an impressive EBITDA of $22.15 billion and a healthy gross profit margin of 54.94%.
Looking ahead, KeyBanc anticipates a gradual increase in broadband subscribers throughout 2025 and into 2026. This expectation is based on Charter’s strategic positioning and the introduction of converged offers. The firm also forecasts continued careful expense management to drive modest adjusted EBITDA growth in 2025, with an acceleration in 2026. InvestingPro analysis suggests the stock is currently undervalued, with additional ProTips and detailed financial metrics available to subscribers.
The analyst pointed out that 2025 is projected to be a peak year for capital spending for Charter. Despite this, KeyBanc maintains a positive outlook, projecting that free cash flow per share (FCF/sh) will reach approximately $60 in 2027, a significant rise from the estimated $29 in FCF/sh for 2024.
In terms of valuation, Charter Communications is currently trading at 6.5 times its projected 2026 enterprise value to adjusted EBITDA (EV/adj. EBITDA) and 8.8 times its 2026 price to free cash flow (P/FCF). These multiples are notably lower than the company’s three-year averages of approximately 8.5x and 12.2x, respectively. Based on these figures, KeyBanc argues that Charter’s stock presents a compelling investment opportunity.
In other recent news, Charter Communications reported its Q1 2025 financial results, which slightly exceeded earnings per share (EPS) and revenue forecasts. The company achieved an EPS of $8.42, narrowly beating the forecast of $8.41, and reported revenue of $13.7 billion, surpassing the anticipated $13.67 billion. Despite losing 60,000 internet customers, Charter added 514,000 mobile lines, highlighting growth in its mobile services. The company’s net income rose to $1.2 billion, up from $1.1 billion the previous year, and adjusted EBITDA grew by 4.8%. RBC Capital raised Charter’s stock price target to $395 from $385, maintaining a Sector Perform rating due to improved internet Average Revenue Per User (ARPU) trends and cost efficiencies. However, RBC Capital expressed caution about future broadband competition due to expanding fiber and fixed-wireless networks. Charter anticipates capital expenditure reductions by 2028, aiming to enhance its financial performance further. These developments reflect Charter’s strategic focus on mobile growth and operational efficiencies in a competitive market.
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