Charter: Stock Could Double After COVID-Related Q3 Deceleration

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

Summary

• Charter stock fell 4.4% after Q3 results on Friday and is now 18% below its early September peak, and only up 2% year-to-date.

• We believe investors overreacted to a deceleration in Internet net adds that is temporary and due to COVID-related market conditions.

• Management comments and competitors' reports both indicated that the lower net adds were not due to Charter gaining less share.

• Between Q2 and Q3, with just 0.9% more Internet customers, EBITDA grew 5.3%, and Free Cash Flow/Share grew 12.2%.

• Currently at $674.89, the stock can double (25.1% annualized) by 2024 year-end if Free Cash Flow grows just 11.5% annually. Buy.

Introduction: Why Is Charter Stock Down?

Charter released their Q3 2021 results on Friday. Charter shares initially fell by as much as 6.2%, before ending the day down 4.4%, and are now 18% lower than their early-September peak.

We initiated our Buy rating on Charter in January 2020 and have reiterated it multiple times since. Even after today's decline, CHTR stoc…