Frontier Communications stock target raised, holds buy on broadband leadership

On Tuesday, Benchmark raised the stock price target for Frontier Communications (OTC:FTRCQ) (NASDAQ:FYBR) to $37 from $35, while maintaining a Buy rating on the stock. The adjustment reflects a positive outlook on the company's future earnings, with expectations now extending into 2025.

Frontier Communications has solidified its position as a frontrunner in the U.S. broadband market with the launch of its 7 Gig service across its entire service area, announced earlier today.

Frontier's new service is a high-end offering, priced at $299.99 per month with autopay, and includes advanced features such as Wi-Fi 7 and routers. Despite the premium price, there is significant customer interest in high-speed broadband, as evidenced by over 60% of new customers in the second quarter of 2024 opting for plans of one gigabit per second or faster. Moreover, more than half of these customers subscribed to at least one value-added service.

The company's Net Promoter Score (NPS) is reportedly six times higher than that of its nearest cable competitor and ten times higher than the average for the cable industry, according to Recon Analytics. Since December 31, 2020, Frontier has seen a 64% increase in fiber broadband customers, with nearly 2.2 million current installations.

Currently, Frontier has reached 72% of its goal to have 10 million fiber locations passed, with fiber services comprising 73% of the customer base, 55% of the last twelve months' (LTM) revenue, and 65% of the adjusted EBITDA.

Frontier's aggressive expansion and customer adoption rates indicate a strong demand for high-quality fiber broadband services. The company's strategic focus on fiber broadband appears to be paying off, with substantial growth in both their customer base and financial performance metrics.

In other recent news, Frontier Communications reported strong growth in its Q2 2024 earnings call. The telecom company saw a 2% revenue increase, reaching $1.48 billion, and a 5% growth in EBITDA. This success was largely due to significant fiber broadband customer additions, with a record 92,000 new customers, and a 3.5% growth in average revenue per user.

Frontier's strategic focus on expanding its fiber network has surpassed its target, reaching 7 million fiber locations and a 45% penetration rate in established markets.

Despite a net loss of $123 million, primarily due to non-cash items, Frontier's operational cash flow remained strong at $374 million. The company also raised $750 million through a second fiber securitization and accomplished $580 million in cost savings since 2021. Frontier has raised the lower end of its 2024 EBITDA guidance, expecting a 5% growth at the midpoint.

The company anticipates consumer revenue to grow in the low-single-digit range and business and wholesale revenue to be at the higher end of the 1% to 2% range for the remainder of the year. Despite challenges such as higher energy costs and potential variability in business and wholesale revenue, Frontier remains confident in its ability to sustainably grow.

InvestingPro Insights

Frontier Communications (NASDAQ:FYBR) has been a topic of interest among analysts and investors, especially with Benchmark's recent price target upgrade. To provide additional context, InvestingPro data shows a market capitalization of $7.33 billion, which reflects the company's size within the telecommunications industry.

Despite the positive momentum, the company operates with a significant debt burden, according to an InvestingPro Tip. This is an important consideration for investors as it could affect the company's financial flexibility and future growth prospects.

Moreover, Frontier's aggressive growth strategy seems to be reflected in its stock performance, with an impressive one-year price total return of 93.31%. However, it is worth noting that the company's P/E ratio stands at a negative -76.75, indicating that investors are pricing in future growth despite current unprofitability.

The InvestingPro Tips also reveal that analysts do not anticipate the company will be profitable this year, and net income is expected to drop. This contrasts with the stock's trading near its 52-week high, suggesting investor optimism may be factoring in the potential long-term benefits of the company's expansion in fiber broadband services.

For those interested in a deeper analysis, there are additional InvestingPro Tips available that could provide further insights into Frontier Communications' financial health and market performance. These tips are part of the comprehensive tools and data accessible through the InvestingPro platform.

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