Charter: Don't Worry About Q2 Internet Net Add Miss

(Preview) Company Update (CHTR US) (Buy)

Summary

• Charter shares lost another 11% last week after poor Q2 net add numbers in U.S. Cable, and have now halved from their peak.

• We review Charter numbers from a fresh perspective, and conclude that investors have over-reacted by focusing on the net adds metric.

• Internet revenues and EBITDA both grew from Q2. Free Cash Flow also grew, excluding the start of cash taxes and new rural CapEx.

• Internet net adds always dipped in Q2 pre-COVID, Fiber is not a threat and Fixed Wireless gains could be explained by natural Cable churn.

• At $432.10, Charter is at a Free Cash Flow Yield of about 8% and investors may double their money by 2025 year-end. Buy.

Introduction

Charter Communications Inc. shares lost 11.0% last week (July 25-29), losing 8.4% on Thursday after fellow U.S. Cable leader Comcast (CMCSA) released Q2 2022 results, the day before Charter released its own.

CHTR stock is now down 48% from its peak, wiping out all of its gains since October 2019. Compared to the price at which we initiat…