Functional Brands closes $8 million private placement and completes Nasdaq listing
Investing.com -- Oppenheimer downgraded Comcast (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR) to Perform from Outperform in separate notes on Tuesday, citing worsening broadband trends and structural headwinds that are likely to weigh on growth over the next five years.
For Comcast, analyst Timothy Horan said the firm is removing its $38 price target and warned that “broadband subscriber declines will be worse than expected.”
Oppenheimer sees “a challenging five-year period ahead with multiple headwinds,” adding that limited EBITDA growth potential, dilution from the Versant spinout, and rising broadband competition are key factors behind the downgrade.
“We think it will be difficult to grow EBITDA, FCF, and ARPUs over the next five years,” Horan wrote. He added that Comcast will face “a major upfront impact to Media from its NBA contract kicking in, costing $2.5 billion per year with timing to breakeven uncertain.”
The analyst also flagged the spinout of part of Comcast’s cable network business, which he said would drive “an estimated ~200bps hit to margins and ~$2 billion impact to FCF.”
Oppenheimer also downgraded Charter Communications to Perform, warning that “broadband subs will decline more than generally expected for five years-plus.”
Horan noted that third-quarter EBITDA fell for the first time to $5.6 billion, missing the firm’s $5.7 billion estimate.
“Street estimates look too high for the next five years,” Oppenheimer wrote, pointing to intensifying competition from AT&T’s fixed wireless expansion, accelerating fiber growth, and new satellite internet rivals.
The firm also cautioned that Charter’s “high leverage” and the “planned merger with Cox” could create integration headwinds in the short term.