On Thursday, UBS adjusted its outlook for Charter Communications shares (NASDAQ:CHTR), reducing the company's price target from $360.00 to $325.00 while retaining a Neutral rating. The revision follows expectations of increased broadband subscriber losses and modest growth in revenue and EBITDA.
The firm anticipates Charter's first-quarter results to show a rise in broadband subscriber losses due to the slowdown in new sign-ups for the Affordable Connectivity Program (ACP), which ended in February. Despite this, a slight growth in revenue and EBITDA of 0.4% and 1.7%, respectively, is expected, bolstered by price increases and more favorable cost comparisons.
With the ACP funding projected to be depleted by April or May and uncertainty around additional financing, UBS has revised its broadband subscriber estimates for the second and third quarters, forecasting losses exceeding 300,000 in each period. The total expected losses for the year are now around 800,000, a significant increase from the previous estimate of 151,000 losses.
Currently, over 5 million subscribers are enrolled in the ACP, contributing an average revenue per user (ARPU) of $30 per month. UBS predicts that Charter will retain the majority of these subscribers, approximately 80-85%+, albeit at a reduced rate of about $15 per month. Additionally, UBS has incorporated lower broadband ARPU assumptions starting in the second quarter, expecting flat growth compared to the year-over-year increase of 2% or more seen in recent quarters.
These adjusted projections lead to a 2-3% reduction in full-year revenue and EBITDA estimates for Charter Communications, with expectations for roughly flat revenues and EBITDA in 2024 compared to the prior forecasts of 1.7% and 3.2% growth, respectively.
Assuming a steady leverage ratio of around 4.5 times, UBS estimates that this will allow for less than $2 billion in buybacks in 2024, a decrease from the previous UBS estimate of $5 billion and the $3.6 billion in buybacks executed in 2023.
InvestingPro Insights
In light of UBS's revised outlook on Charter Communications (NASDAQ:CHTR), it's worth noting some key metrics and insights that could further inform investors about the company's current situation. Charter's market capitalization stands at $47.4 billion, with a P/E ratio of 9.58 that slightly adjusts to 9.37 when considering the last twelve months as of Q4 2023. Despite a modest revenue growth of 1.08% during the same period, the company's stock has experienced a significant decline, with a 25.2% drop in the three-month price total return and an even steeper 33.97% fall over the last six months.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which aligns with UBS's comment on Charter's share repurchase activities, although at a reduced scale compared to previous estimates. Additionally, Charter is recognized as a prominent player in the Media industry, which can be a double-edged sword in the current market climate, given the intense competition and the company's recent performance. Investors should also be aware that Charter does not pay a dividend to shareholders, which may influence investment decisions based on income preferences.
For those seeking a deeper analysis, there are additional InvestingPro Tips available that can provide a more comprehensive understanding of Charter's financial health and market position. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to these valuable insights. With these considerations in mind, investors can make more informed decisions regarding their positions in Charter Communications.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.