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Charter Communications (NASDAQ:CHTR) sank 7.2% Friday, a response to disappointing earnings that morning showing slowing broadband user growth – but Friday marked the eighth down session in a row for the cableco, a stretch during which it lose 23% of value.
On Wall Street, Benchmark hasn’t lost the faith, sticking with a Buy rating and a still-generous price target, even as it counts up the reasons connectivity momentum is slowing.
The company cited “sluggish” activity in U.S. household moves, but that’s not the only thing constraining growth, analyst Matthew Harrigan says.
Analysts have spoken for months about the risks of slowing late-pandemic and post-pandemic growth on cablecos like Charter and its rivals Comcast (CMCSA) and Altice USA (ATUS).
A “significant stall-out” in broadband pricing power is a worse risk than any unit slowdown, though, Harrigan says – even as “pricing should be supported by ~25%+ annual consumption growth and improving functionality off new Wi-Fi iterations, etc.” He figures that a 1% variation in annual broadband pricing affects Charter’s fair value by $25/share, vs. $10/share for a 100,000 change in annual additions.
Overall, though, “We still feel a compelling and attractively priced product bouquet, especially broadband and also
Spectrum Mobile with 373K lines added in the March quarter, can enable Charter to build on its sub 30% share of wireline and mobile household spend within its footprint,” Harrigan says.
He’s trimmed his price target, but just to $805 from $825; that still implies 86% upside after CHTR rose 1% today to break its losing streak and land at $432.54/share.
Between Charter and Comcast, cable companies’ late-week performance was enough to lead the entire Communications sector lower for last week.
