Verizon and AT&T Performance Woes Impact Charter Communications: Analyst Lowers Expectations

Benchmark analyst Matthew Harrigan reiterates a Buy rating on Charter Communications, Inc CHTR, lowering the price target from $620.00 to $600.00.
The re-rating ahead of the company's quarterly results on Friday reflects adjustments to the analyst's market share model to reflect actual results for fiber and FWA results from Verizon Communications Inc VZ and AT&T Inc T, leading to the downward revision of the price target.
The analyst views Charter's 3-year network upgrade initiative as significantly ROI accretive with attractive price value propositions for broadband + mobile, including Spectrum One, resonating with consumers in the current U.S. economic slowdown.
Close to 400K annual broadband unit add estimate after 2023 seems achievable, including RDOF or Rural Opportunity Digital Fund build activity.
Complementing broadband speed leadership, Charter is constructing a "Spectrum Mobile Network" coupling its Verizon Wireless MVNO with its superior Wi-Fi capabilities to be augmented by Wi-Fi 6e and 7 and calculated use of CBRS spectrum.
The analyst expects 1Q23 total sales to have increased 3.5% to $13.7 billion, with concomitant EBITDA up 3.0% to $5.4 billion, given lower costs off modest churn activity coupled with continued restrained gross additions.
The analyst will look for CapEx to reach $2.5 billion, representing 18.1% of sales, and reported diluted EPS to register at $7.08, up from $6.90 a year ago.
The net debt estimate is $98.2 billion, with leverage at 4.5x, while the stock buyback estimate is $1.8 billion.
The analyst estimates Charter gained 78K residential broadband customers in 1Q23.
Price Action: CHTR shares traded higher by 6.88% at $342.70 on the last check Thursday.

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