uploads/2020/05/charter-stock-buy.jpg

Should You Buy Charter Stock after Its Q1 Earnings?

By

Updated

Charter Communications (NASDAQ:CHTR) stock rose 2.9% on May 1 and closed at $509.64 with a market capitalization of $105.2 billion. The stock rose after the company released its financial results for the first quarter on May 1 before the market bell. Charter Communications stock rose even though the company missed analysts’ revenue and earnings estimates in the first quarter.

Article continues below advertisement

Charter’s Q1 performance

In the first quarter, Charter Communications posted a non-GAAP EPS of $1.86—lower than analysts’ consensus estimate of $2.73. The company reported adjusted earnings growth of 67.6% YoY (year-over-year) in the first quarter.

Charter Communications’ revenue rose 4.75% YoY to $11.74 billion in the first quarter—$46 million below Thomson Reuters’ consensus revenue expectation. The company’s commercial services revenue rose 1.9% YoY to $1.6 billion in the first quarter, while its residential services revenue rose 4.2% YoY to $9.3 billion in the quarter. The company’s advertising revenue rose 5.8% YoY to $365 million in the quarter. Also, mobile sales increased to $258 million in the quarter from $140 million in the first quarter of 2019.

Charter’s subscriber metrics

Charter Communication’s residential broadband revenues rose 9.5% YoY to $4.4 billion in the first quarter. The company gained 582,000 net broadband subscribers in the quarter, which included 563,000 residential subscribers and 19,000 business subscribers. The company’s total broadband subscribers rose 6.1% YoY to 27.2 million at the end of March 31, 2020. In the first quarter of 2019, the company gained 428,000 net broadband subscribers, which included 398,000 residential subscribers and 30,000 business subscribers.

Article continues below advertisement

In the first quarter, Charter lost 70,000 net residential video customers compared to net losses of 152,000 in the first quarter of 2019. Despite residential video subscriber losses, the company’s residential video revenues rose 0.9% YoY to $4.42 billion in the first quarter. The company’s residential video subscribers fell 2.5% YoY to 15.55 million at the end of March 31, 2020. Charter is losing video customers due to cord-cutting.

According to a FierceVideo report, Charter Communications CEO Tom Rutledge said, “Our ability to service existing customers with significantly more data, and install new customers at an accelerated rate, is a direct result of the commitment of our employees and the $40 billion of investment we have made in our infrastructure in just the last five years. Charter remains committed to delivering outstanding products and services, keeping the communities we serve connected, working and learning, and doing our part to help our country recover from this crisis.” He also said, “And we continue to invest in the next generation of communications technology and infrastructure that will allow us to service the future of connectivity.”

Article continues below advertisement

Analysts’ recommendations

Among the 35 analysts following Charter stock, 23 recommend a “buy”—up from 22 in the last month. About 12 analysts recommend a “hold”—unchanged from the last month. None of the analysts recommend a “sell.” According to analysts’ consensus, the stock has a 12-month mean target price of $546.29. The average target price is at a 7.2% premium to the closing price of $509.64 on May 1. The consensus target price for the stock has risen from $539.67 in April—growth of 1.2%.

Many analysts increased their target price for Charter Communications stock after its first-quarter financial results.

  • Keybanc increased its target price from $576 to $604.
  • J.P. Morgan increased its target price from $550 to $575.
  • Cowen and Company increased its target price from $593 to $597.
  • TD Securities increased its target price from $515 to $560.
  • Rosenblatt Securities increased its target price from $600 to $620.

Stock price movement

Charter Communications stock was trading 6.8% below its 52-week high of $546.54 and 47.4% above its 52-week low of $345.67. On a year-to-date basis, the stock has risen about 5.1%.

Based on the last closing price of $509.64, Charter Communications was trading as follows:

  • 4.8% above its 20-day moving average of $486.27
  • 8.9% above its 50-day moving average of $468.15
  • 5.1% above its 100-day moving average of $485.07

Charter has a 14-day relative strength index score of 63, which indicates that the stock is approaching “overbought” levels. The stock’s 14-day MACD is 1.28, which indicates an upward trading pattern.

Comcast (NASDAQ:CMCSA) added 477,000 net broadband customers in the first quarter, while the company lost 409,000 pay-TV customers. Read Is Comcast Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

Advertisement

More From Market Realist