Charter: Continuing to Turn the Corner in Q2; Reiterate Buy

Company Update (CHTR US) (Buy)

Highlights

• Residential revenues grew 4.1% year-on-year excluding Video

• EBITDA was flat despite 2022 costs step-up & weak ad market

• Internet net adds were 77k, despite Q2 seasonal weakness

• FCF Yield was 2.9%, or 7.1% adjusted for tax and rural CapEx

• We see 53% upside (18.7% p.a.) by 2025 year-end. Buy

Introduction

Charter reported Q2 2023 results on Friday (July 28). Shares were volatile throughout the day but eventually closed down 1.0%; they have been volatile for the past 12 months too, down 8.2% overall but up 16.2% year-to-date:

Charter Share Price (Last 1 Year)

Source: Google Finance (29-Jul-23).

We have been following the U.S. Cable sector for nearly a decade, and first published our research on Charter online with a Buy rating in January 2020. After initially gaining nearly 60%, Charter shares have disappointed since late 2021 and, despite rebounding more than 30% since September 2022, remain 23% below the price at our initiation. (For a recap of our current investment case, see the firs…