Charter's Future Brightens With Disney Deal And Network Upgrades: Analyst

Benchmark analyst Matthew Harrigan maintained Charter Communications Inc CHTR with a Buy and raised the price target from $575 to $600.

The analyst reiterated his favorable posture toward the new programming template with Walt Disney Co DIS, which collapses the arbitrary and archaic wall between linear channels and streaming. This agreement is essential in preserving video business economics and necessary to both parties. The integration of live TV and streaming apps is further advanced by the 10.04 nationwide launch of the Xumo Stream Box to Spectrum households, leveraging the Spectrum TV app. 

Other building blocks for Benchmark’s continued favorable disposition toward Charter stock include the upgrade of Charter’s network to multi-gig symmetrical speeds over the next three years via DOCSIS 4.0 at a $100 per home passing cost, the company’s aggressive rural build program with benefit from government subsidies, and continued mobile and converged broadband growth momentum off the Verizon Communications Inc. VZ Verizon Wireless MVNO complemented by in-house Wi-Fi capabilities and CBRS spectrum optionality. 

Harrigan expects 3Q23 total sales to have increased 1.1% to $13.71 billion, with concomitant EBITDA up 1.3% to $5.48 billion. EBITDA margin should be flat at 40.0%. The analyst looks for CapEx to come in at $2.72 billion, representing 19.9% of sales, with Charter generating $1.43 billion in free cash flow. Harrigan looks for EPS of $8.49, up from $7.38 a year ago. The net debt estimate is $96.98 billion.

The analyst estimates Charter gained 61K residential broadband customers in 3Q23, with residential video declining by (199K) and residential voice down (229K). Benchmark has Charter gaining 614K mobile customers. He expects reported Consumer ARPU to register a modest 0.6% increase to $120.69. 

Price Action: CHTR shares traded lower by 0.37% at $450.99 on the last check Wednesday.

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