Charter: Positive Trends In Q4, But Patience Needed
(Preview) Company Update (CHTR US) (Buy)
Summary
Charter's Q4 results were stable, with Internet net adds higher than prior quarters and small sequential growth in revenues and EBITDA.
Internet growth will be helped by its accelerated CapEx in 2023; rival Fixed Wireless net adds also decelerated for the first time in Q4.
Q4 Free Cash Flow represented a 10% yield excluding rural CapEx, but rural and other projects will remain a burden up to 2025.
We cut our forecasts to present a base case where Free Cash Flow declines in 2023-25 but doubles to nearly $79 after 2025.
With shares at $402.61, we expect an exit price of $708 and a total return of 76% (21.5% annualized) by 2025 year-end. Buy.
Introduction
Charter Communications released its Q4 2022 results two weeks ago (on January 27). CHTR shares fell 4% that day but have since recovered; they are up 18% year-to-date but still down 34% from a year ago.
Compared to the price at which we initiated our Buy rating in January 2020, Charter shares have lost 21%, having first made significant…