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Investing.com - Wolfe Research upgraded Charter Communications (NASDAQ:CHTR) stock rating from Underperform to Peerperform on Friday. The cable giant, with a market capitalization of $58.36 billion and annual revenue of $55.14 billion, has shown strong profitability with earnings per share of $35.86.
The upgrade comes as Wolfe Research identified potential financial benefits for Charter from bonus depreciation, which could add approximately $1.8 billion, or about $11 per share, to free cash flow in 2025.
Charter, which faces high infrastructure capital intensity and financial leverage, "could benefit most" from these tax advantages according to Wolfe Research’s analysis.
Despite ongoing concerns about "rising competition costing cable residential broadband subs & promo costs," the research firm believes bonus depreciation could provide a "tailwind to DOCSIS upgrade timelines" and add "much needed dry powder to Charter’s war chest."
Wolfe Research anticipates Charter has three potential paths to deploy the bonus depreciation benefit: DOCSIS upgrades, reducing debt levels, or share buybacks.
In other recent news, Charter Communications has made significant strides with its strategic initiatives and financial outlook. Charter announced its acquisition of Cox Communications, a move valued at $34.5 billion. This acquisition is expected to enhance Charter’s operational scale, with projections indicating a 10% accretion to free cash flow per share within three years, as noted by KeyBanc analysts. Fitch Ratings has responded positively to this development, placing Charter on a positive rating watch, anticipating improved leverage and scale benefits post-acquisition.
Additionally, Charter has expanded its Spectrum TV App to LG and VIZIO smart TVs, aiming to provide greater accessibility and convenience for its users. On the analyst front, Bernstein has downgraded Charter to Market Perform, citing recent stock gains and ongoing challenges like broadband subscriber losses. Meanwhile, UBS has maintained a Neutral rating with a $400 price target, acknowledging the potential long-term benefits of the Cox deal despite initial dilution to free cash flow. Charter’s financial strategies include a focus on shareholder returns and maintaining leverage in a newly defined range, as highlighted by UBS. These developments illustrate Charter’s efforts to adapt and grow in a competitive telecommunications landscape.
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