Charter Communications Inc. (CHTR) Stock Valuation

Charter Communications Inc. is the parent company of Spectrum, they provide broadband communication services including internet, TV, and cellular. Just within their internet offerings they service over 30 million customers, generating recurring revenue.

CHTR is currently trading at an extremely low P/E of 6x, representing the companies dismal forward outlook. The company had a not so gracefully fall from a high of over $800 in August of 2021 to now trading around the $215 range, a low not seen since May of 2016. In recent times, Spectrum has continued to lose customers to competitors and growth continues to slow as investors lose faith in the company's direction. Morningstar even noted "We don't expect Charter to return to net broadband customer growth over the next couple of years."

Not unexpectedly the model, even in the baseline case, presents the company as quite drastically undervalued. $440 vs $215 suggesting the company would still have room to double in value. The model doesn't account for a few big factors. One major one being the interest payments, which in 2024 equated to a greater amount than the companies net income, both hovering just above $5 billion. In addition the model understates the companies slow growth, focusing more on the actual amount of cash generated (to be fair it is a cash generating machine) thus it looks less on how shareholders are compensated and more at how profitable a buyout/LBO would be.

Analysts seem to have varied views on the company as well. While some analysts from banks like Barclays and BNP Paribas say the company still hasn't bottomed out quite yet, putting fair value at around $200. While analysts from banks like Citi and Deutsche saying it has room to grow to $310 and $275 respectively. Each of these analysts ratings come on the week of 11/3, one week before this analysis. Overall the company has a hold rating from all sources except Morningstar.

The final straw for this evaluation is the overall sentiment towards the company. Its stock has been in a death spiral for the last 4 years and continues to drop. The company is less aimed at generating returns for shareholders and more at a steady cash flow. Despite mixed sentiment leaning towards the company being undervalued, Modena will not move forward with an investment.