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Charter Communications shares suffered their worst single-day decline on Friday as the company’s latest financial results showed continued pressure in the cable industry.
The company reported a net loss in broadband subscribers of 61,000, but analysts said they expected modest positive growth, despite management having previously indicated that net additions would be negative. I expected it.
CHTR Charter,
He said growth in subsidized rural customers was faster than expected, but some analysts pointed to a flip side to the move. “The implications for their legacy footprint only become more alarming,” Moffett Nathanson analyst Craig Moffett said in a note to clients.
Charter stock fell 16.5% in Friday trading, its worst single-day decline on record.
Traditional cable providers such as Comcast Corp. CMCSA;
Charter is facing increasing competition from wireless players who are pushing fixed wireless access (FWA) services onto subscribers. Verizon Communications Inc. VZ,
and T-Mobile US Inc. TMUS,
This includes companies that provide Internet services to customers built on wireless networks. Additionally, Charter faces competition from fiber products.
See also: Comcast beats profits but loses Internet subscribers more than expected
“While we are well on track to execute on our long-term strategic initiatives and Spectrum One is committed to driving mobile growth, Internet growth in our existing footprint has been challenging and clearly fixed wireless and Driven by more persistent competition from similar-level wirelines, Charter President and CEO Chris Winfrey said on an earnings call.
Bernstein analyst Laurent Yun said: “Despite rural penetration moving ahead of schedule, competition from fiber and FWA remains high and challenges are expected to continue into 2024. It will be done,” he commented.
He added: “If you want to be gloomy about cable TV, listen to FWA leaders explain their plans for the next two years (and beyond).”
Winfrey said Charter’s view is that “the impact of fixed wireless is temporary.”
“Our Internet products are faster and more reliable,” he said by phone. “Our prices are lower when bundled with mobile as well. Our customers’ bandwidth needs continue to increase.”
Another issue that has spooked charter investors is the company’s capital spending projections.
“Charter has provided long-term capital spending guidance through 2027 that exceeds our expectations and consensus for 2024 and 2025,” said Lightshed Partners analysts Walt Peachick and Joe Garrone. This was stated in a note to customers. “Although it begins to decline in 2026, this range suggests capital intensity is higher than previous guidance.”
What’s next for Charter? Bernstein’s Yun believes the company needs to focus investors’ attention on financials rather than subscriber performance.
“This simple story will resonate with cable investors with realistic expectations for growth. [the top line] “We can slightly expand profits in the low single digits,” he wrote. “Comcast has been successful in implementing this. [investor relations] Strategy (but with a different set of issues) and charter should follow suit. Given the obvious headwinds, pursuing submarines is not a viable option in the short term. ”
Yun evaluated Charter stock based on market performance and lowered his price target from $425 to $414 in his latest note.
Moffett Nathanson’s Moffett said the company doesn’t need to significantly increase broadband subscriber numbers to reassure investors. Management wants to “just show that the broadband division’s performance is predictable enough to be reasonably close to zero or slightly better so that we can focus on all the other good things that are happening right now.” “That’s fine,” he wrote, calling for wireless, average growth. Revenue and profit per user are positive.
But Friday’s earnings report is “a frustrating reminder that we’re not there yet,” added Moffett, who rates the stock a buy with a price target of $660.
The results were enough to prompt Wells Fargo’s Stephen Cahall to change his stance on the stock, downgrading it from overweight to equal weight.
Charter’s latest figures “change our theory,” he said, predicting a “much more challenging” broadband environment now. Meanwhile, expanding the company’s free cash flow “feels too far away.”
Cahall lowered his price target to $340 from $460 in a note late Friday.
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