Charter: Sector Fears Misplaced; 12% Fall Means Potential 18% Annualized Return

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

Summary

• Charter has fallen 12% since September, after bad news at its peers, providing a good entry point for this multi-year compounder.

• The bear case is that AT&T's new fiber and Verizon's fixed wireless will erode Charter's business; but these efforts are still early stage.

• Disappointing news about Q3 net adds are due to forecasting issues (Comcast) or bad management (Altice USA), and mean little for Charter.

• Ultimately, cable broadband is a great business if managed well, and management comments this month provided more evidence it is.

• With shares at $727.49, we expect an exit price of $1,247 and a total return of 71% (18.0% annualized) in just over 3 years. Buy.

Introduction

We review our investment case on Charter Communications Inc. (“CHTR”) after its share price corrected 12% since early September, following negative news at its peers Comcast and Altice USA.

We initiated our Buy rating on Charter in January 2020, and have reiterated it regularly since. Despite its recent fall, CHTR st…