KeyBanc sees tax law changes boosting Charter stock

On Monday, KeyBanc analysts expressed optimism about the potential impact of the proposed "One Big Beautiful Bill" on Communications Services stocks, highlighting Charter Communications Inc. (NASDAQ:CHTR) as the primary beneficiary. The bill, which was passed by the House of Representatives on May 22, aims to reinstate provisions from the 2017 Tax Cut and Jobs Act, including 100% bonus depreciation, anticipated to significantly reduce cash tax payments and enhance free cash flow for companies in the sector. According to InvestingPro data, major players in this space like Comcast are already showing strong financial health with an overall GOOD rating.

According to KeyBanc, Charter Communications stands to gain the most from these changes, with expectations of a 70-90% reduction in cash taxes and a 30% increase in free cash flow. The analysts suggest that these improvements would support a rise in Charter’s free cash flow per share from approximately $31 in 2025 to over $60 in 2027, indicating that the stock might currently be undervalued.

The proposed legislation is also seen as favorable for other companies within KeyBanc’s coverage, including AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), Comcast Corporation (NASDAQ:CMCSA), and T-Mobile US Inc. (NASDAQ:TMUS). AT&T, for instance, is expected to experience an 80% decrease in cash taxes and a 15-20% increase in free cash flow.

While the Senate may introduce changes to the bill, KeyBanc analysts believe the provision for 100% bonus depreciation is unlikely to be significantly altered. The extension of bonus depreciation through 2029 (and 2030 for certain investments) is poised to lower cash tax payments for these companies.

The analysts note that the impact of the tax law changes will vary among companies, with T-Mobile US expected to benefit the least, as it is not a full cash taxpayer in 2025. Nonetheless, the overall outlook for the sector remains positive, particularly for Charter Communications.

In other recent news, Comcast Corporation has been actively involved in several significant developments. KeyBanc Capital Markets maintained an Overweight rating on Comcast, with a price target of $45, highlighting the potential revenue boost from EPIC Universe, a new theme park projected to generate over $1.75 billion by 2026. In a strategic move, NBCUniversal, a Comcast subsidiary, has submitted a bid for Major League Baseball rights, previously held by ESPN, for a sum lower than ESPN’s $550 million annual deal. This bid, if successful, would allow NBC to broadcast games on Sunday nights and stream them on Peacock.

Meanwhile, Argus Research downgraded Comcast’s stock from Buy to Hold due to challenges in the broadband market, citing increased competition and concerns over macroeconomic uncertainties. Despite Peacock’s subscriber growth, its lack of profitability remains a concern for Argus. Comcast also announced plans to redeem $1.5 billion in notes due August 2025, as part of its financial management strategies. This decision reflects Comcast’s ongoing efforts to manage its debt portfolio effectively. These recent developments underscore Comcast’s dynamic business activities and strategic decisions in the current market environment.

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