Buckingham Makes The Bull Case For Charter Communications

Shares of Charter Communications, Inc. CHTR have lost nearly 15 percent over the past three months, but some analysts are confident enough in the cable company's 2018 prospects to recommend buying the stock.

The Analyst

The Buckingham Research Group's Matthew Harrigan initiated coverage of Charter's stock with a Buy and $415 price target.

The Thesis

Charter remains focused on enacting its "operational playbook" across the legacy Time Warner Cable and Bright House footprints, Harrigan said in the Wednesday initiation note.

By applying the Charter Spectrum pricing and product packaging across the entire new Charter footprint, management's "volume-oriented strategy" could grow customer relationships by 5 to 6 percent annually and also reduce requisite service transactions, the analyst said. 

A Charter broadband home is worth nearly 2.8 times a video home, which results in shared costs, relative CPE needs and churn effects, the analyst said. This figure could increase to 3.4x, assuming a $10 standalone monthly broadband pricing premium, Harrigan said. 

Charter is busy creating "superior long-term financial engineering upside relative to immediate M&A," according to Buckingham. The firm projects that Charter is likely to retire over 25 percent of its shares through 2021, but is unlikely to be paying a dividend.

Price Action

Charter stock was down slightly at the close Wednesday at $329. 

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