RBC Capital cuts Charter stock price target to $380

Published 2025/01/15, 22:26
CHTR
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On Wednesday, RBC Capital Markets adjusted its financial outlook for Charter Communications (NASDAQ:CHTR), reducing the company's price target from $390.00 to $380.00, while maintaining a Sector Perform rating. The revision comes as RBC Capital's analysts revise their model to account for the impacts of natural disasters and other minor adjustments. According to InvestingPro data, four analysts have recently revised their earnings expectations downward for the upcoming period, while the company's current market capitalization stands at $55.64 billion.

Charter Communications is anticipated to see some benefits in subscriber performance due to new plans that were introduced in September. However, analysts at RBC Capital expect that the average revenue per user (ARPU) for broadband will face pressure as the fiscal year 2025 approaches. This projection has led to a slight decrease in the price target to $380, reflecting concerns over higher interest rate assumptions compared to previous models. InvestingPro analysis suggests the stock is currently slightly undervalued, with additional insights available in the comprehensive Pro Research Report, which offers deep-dive analysis of Charter among 1,400+ US equities.

For the fourth quarter of 2024, RBC Capital forecasts that Charter will experience wider residential internet net losses of 120,000, which is a more significant decline than the firm's previous estimate of 70,000 and the consensus estimate of 141,000. Additionally, estimates for residential video losses have been adjusted to 233,000, which is an increase from the prior RBC Capital estimate of 218,000 and closer to the consensus estimate of 242,000.

These updates have been described as having a minor impact on Charter's consolidated financials. RBC Capital's projections for the company's revenue, EBITDA, and free cash flow (FCF) in the fourth quarter of 2024 are $13.9 billion, $5.7 billion, and $0.6 billion, respectively. These figures align with consensus estimates for revenue and EBITDA but fall short on FCF due to higher anticipated capital expenditures and mobile working capital.

In other recent news, KeyBanc Capital Markets expressed optimism for Charter Communications, expecting improvements in Internet subscriber trends and modest growth in adjusted EBITDA. The company's free cash flow per share could exceed $60 by 2027, implying the stock may be undervalued. On the other hand, KeyBanc was cautious about Verizon Communications (NYSE:VZ), expecting a decline in free cash flow and the lowest adjusted EBITDA growth among peers in 2025. Equinix (NASDAQ:EQIX) also faced skepticism from KeyBanc, with the expectation of missing consensus in the fourth quarter due to foreign exchange pressures.

In another development, Charter Communications received an upgrade from KeyBanc, moving from a Sector Weight to an Overweight rating. The firm also set a new price target for Charter at $500.00. The upgrade was based on expected improvements in broadband subscriber trends and cost efficiencies that are likely to drive modest EBITDA growth in 2025.

Charter Communications is also set to acquire Liberty Broadband (NASDAQ:LBRDA) in an all-stock transaction, which is expected to enhance liquidity and direct ownership for Liberty Broadband shareholders. The acquisition is expected to close on June 30, 2027.

In the telecom sector, AT&T, Verizon, and Comcast (NASDAQ:CMCSA) saw shares decline following the Supreme Court's decision not to hear an appeal contesting a New York law that mandates broadband rate caps for low-income households. The decision means that states can regulate broadband pricing when the Federal Communications Commission is not.

Cogent Communications (NASDAQ:CCOI) reported mixed financial results for the third quarter of 2024, with total revenue of $257.2 million and an increase in EBITDA to $60.9 million. The company plans to add over 100 carrier-neutral data centers annually for the next several years, focusing on serving small and medium-sized businesses in North American multi-tenant office buildings.

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