Charter : Stable Q1 Net Adds, Cash Flow Up Double Digits (Preview)

Company Update (CHTR US) (Buy)

Summary

• Charter reported strong Q1 2021 results last Friday, with Cable customer net adds stable at 2019 levels as management predicted.

• With strong Internet revenue growth, total revenues grew 6.7%, EBITDA grew 12.5% and Free Cash Flow/Share grew 47.6% year-on-year.

• Charter plans to be the "predominant" Mobile provider in its markets, and to spend $5bn over 6 years to connect 1m unserved customers.

• We believe Charter will reach $48 in FCF/Share in 2024, powered by continuing strong growth in its core Cable business alone.

• With shares at $677.31, we expect an exit price of $1,193 and a total return of 76% (16.7% annualized) by 2024 year-end. Buy.

Introduction

Charter Communications, Inc. released its Q1 2021 earnings last Friday (April 30). In this article, we explain how the results support our investment case, and describe new developments in Mobile, CapEx and tax.

We originally initiated a Buy rating on Charter stock in January 2020. Since then Charter shares have gained 32.6% in 15 months.