JPMorgan Downgrades Charter Communications (CHTR) to Neutral, 'Weaker Core Broadband and Slowing EBITDA'

JPMorgan analyst Sebastiano Petti downgraded Charter Communications (NASDAQ: CHTR) from Overweight to Neutral with a price target of $370.00 (from $445.00).

The analyst comments "We are downgrading Charter to Neutral (from Overweight) and lowering our December 2024 price target to $370 (from $445). Our downgrade is driven by 1) weaker broadband subscriber trends (with losses expected through 2025); 2) slower EBITDA growth due to a combination of slowing unit growth, lower ARPUs, and higher costs; 3) higher capex; and 4) uncertainty related to the ACP program which is not currently reflected in our model. We were surprised by the material slowdown in subscriber momentum in 4Q relative to peers - particularly the sharp drop in “core” (non-rural subsidized) markets. Management attributed the slowdown to increased FWA availability as well as heightened promotional activity from both FWA and fiber which weighed on gross additions. However, competition from FWA and fiber has been building for some time which makes it difficult to explain the relative underperformance in 4Q23. Nonetheless we now forecast total broadband net losses of 100k in 2024 vs +150k prior. Our 2024 EBITDA goes to $22.40b (-2% vs our prior $22.79b) reflecting lower revenue (subs, ARPU) and higher costs (programming, sales/marketing, other cost of revenue). We were encouraged by management’s messaging on cost efficiencies and pricing (passing through inflation), but expect this benefit trends over time. We also raise 2024/2025 capex to $12.30b/$12.25b following updated guidance as the network evolution build is extended to 2026. FCF goes to $2.89b in ‘24 on lower EBITDA, higher capex, and higher cash taxes. Our updated price target of $370 implies 7.2x 2025E EBITDA and 17.0x 2025E fully-taxed FCF/ share vs 6.9x 2024E EBITDA and 17.7x 2024E FCF today."

For an analyst ratings summary and ratings history on Charter Communications click here. For more ratings news on Charter Communications click here.

Shares of Charter Communications closed at $319.21 yesterday.

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