On Tuesday, Benchmark analyst Matthew Harrigan increased the stock price target for Charter Communications (NASDAQ:CHTR), a major telecommunications and mass media company, to $450 from the former target of $440. The firm continues to endorse the stock with a Buy rating.
The adjustment follows Charter's recent earnings release last Friday morning, which prompted a reassessment of the company's financial projections for 2025. The new price target by Benchmark is based on a comprehensive market share analysis for U.S. broadband and video services.
According to the analyst, the price target for Charter Communications would have surpassed $500 if not for a conservative adjustment in the leverage assumption used in the cost of capital calculations. This adjustment reflects a market tolerance for a 3.5 times leverage ratio rather than the previously assumed 4.25 times. The actual leverage for Charter was reported at 4.22 times on a last twelve months (LTM) basis as of September 30, 2024.
Furthermore, the valuation takes into account a potential merger with Liberty Broadband (NASDAQ:LBRDA), proposing a 0.29 times exchange ratio of Liberty Broadband's stock (LBRDA) into Charter. The analyst views the simplification of the capital structure and the removal of the Liberty shares as beneficial, complementing a more balanced U.S. broadband market environment.
In other recent news, Charter Communications has been the focus of several adjustments by financial firms. RBC Capital Markets raised its price target for the company to $390, citing Charter's third-quarter earnings which surpassed estimates.
Meanwhile, BofA Securities upgraded its rating for Charter from Neutral to Buy, lifting its price target to $450. The firm highlighted improvements in broadband subscription trends and expected decline in capital expenditure as reasons for the upgrade. Rosenblatt Securities and Loop Capital also adjusted their price targets for Charter to $366 and $385 respectively, maintaining Neutral and Hold ratings.
Charter reported a net income of $1.3 billion with free cash flow of $1.6 billion, while capital expenditures reached $2.6 billion. Despite losing 110,000 internet customers, the company added 545,000 Spectrum mobile lines, leading to a 1.6% increase in revenue and a 3.6% rise in adjusted EBITDA. The company's management has forecasted a loss of 100,000 Affordable Connectivity Program (ACP) internet subscribers in the fourth quarter of 2024.
These recent developments underscore Charter's commitment to strategic investments and customer-focused initiatives. The company is planning for continued growth in mobile offerings and investing in multi-gig services and potential video packages. Charter's new strategy "Life Unlimited" and better-than-expected broadband subscriber results have been noted by analysts as positive influences on the company's future prospects.
InvestingPro Insights
Charter Communications' recent performance aligns with Benchmark's bullish outlook. According to InvestingPro data, the company's market capitalization stands at $59.71 billion, with a P/E ratio of 11.61, indicating potential value for investors. The company's revenue for the last twelve months as of Q3 2024 reached $54.87 billion, with a gross profit margin of 39.58%, showcasing its financial strength.
InvestingPro Tips highlight Charter's recent market momentum, with a significant 14.84% return over the last week and a strong 15.17% return over the last month. This aligns with Benchmark's increased price target and Buy rating. Additionally, analysts predict the company will remain profitable this year, supporting the positive outlook.
It's worth noting that Charter's PEG ratio of 2.79 suggests the stock might be trading at a high P/E ratio relative to its near-term earnings growth. This could be a point of consideration for investors evaluating the stock's current valuation against its growth prospects.
For readers interested in a deeper analysis, InvestingPro offers 11 additional tips for Charter Communications, providing a more comprehensive view of the company's financial health and market position.
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