Charter: Unfairly Punished In September Market Correction

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

Summary

• Charter shares lost 24% during the September correction, we believe unfairly, and rebounded 9% in the first three days of October.

• Shares are down 60% from their peak and are at a 10.5% tax-adjusted Free Cash Flow Yield, which should help limit further downside.

• Recent comments by industry executives indicated that Q2 trends have continued. Charter and Altice USA are getting new CEOs.

• We believe investors have become too fixated on broadband net adds, which is just one of several growth drivers for U.S. Cable.

• With shares at $329.28, we expect an exit price of $1,000 and a total return of 204% (41% annualized) by 2025 year-end. Buy.

Introduction

We review Charter Communications Inc. after shares continued to be volatile, falling 24% in September and then rebounding 9% in the first three trading days of October.

Charter shares have now fallen 60% from their peak last September, a peak-to-trough decline that is twice as large as the approximately 30% corrections seen in February-March o…