On Tuesday, Wells Fargo reiterated its Equal Weight rating on shares of Charter Communications (NASDAQ:CHTR), maintaining a price target of $260.00.
The firm's analysis suggests that identifying key performance indicators for Charter's second-quarter earnings will be challenging due to the discontinuation of the Affordable Connectivity Program (ACP) which had previously funded broadband for over 5 million subscribers. As a result, the focus is expected to shift to the company's EBITDA growth and free cash flow (FCF) for 2024.
The end of ACP funding in June is seen as a disruptive factor for Charter's near-term performance. To mitigate this, Charter has introduced a promotion offering one year of free mobile lines and is expected to provide bill credits to some subscribers.
Despite these efforts, Wells Fargo anticipates a decline in broadband net adds, estimating a loss of 400,000 subscribers in the second quarter compared to the Street's estimate of a 236,000 loss. The firm also differs from consensus with an estimate of approximately 900,000 mobile net additions, while the Street expects around 500,000.
The analyst from Wells Fargo noted the lack of consensus on the company's performance metrics, highlighting that more concrete figures such as EBITDA and FCF are likely to gain more attention. The Street's estimated EBITDA for Charter Communications stands at $5.49 billion, with a projected FCF of $400 million for the second quarter of 2024.
The elevated capital expenditures (capex) by Charter Communications are also mentioned as a factor that could weaken the company's valuation support. As investors and analysts await the company's quarterly report, these financial metrics will be closely scrutinized to assess Charter's fiscal health and operational efficiency amidst the post-ACP landscape.
In other recent news, Charter Communications has been the subject of various financial and strategic developments. Goldman Sachs initiated coverage on Charter with a 'Sell' rating due to anticipated competitive pressures from fixed wireless services and high-end fiber offerings.
Concurrently, Charter extended its multi-year distribution agreement with Paramount Global, continuing to provide Spectrum TV customers access to Paramount's portfolio and introducing Paramount's direct-to-consumer streaming services to Spectrum packages at no additional cost.
In a bid to manage its debt, Charter disclosed the pricing for its tender offer of the company's 4.908% senior secured notes due in 2025, with an aggregate principal amount cap of $2.7 billion. The company also successfully completed the issuance of $3 billion in senior secured notes, divided into two sets due in 2029 and 2034, with interest rates of 6.100% and 6.550% per annum, respectively.
Lastly, Charter launched a cash tender offer to repurchase up to $1.7 billion of its 4.908% senior secured notes due in 2025. These financial maneuvers are part of Charter's broader strategy to effectively manage its debt obligations. These recent developments highlight the company's proactive steps in navigating its financial and competitive landscape.
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