Charter Communications Strong On Mergers, Competition Rife

On Dec 6, 2016, we issued an updated research report on cable multi-service operator (MSO) Charter Communications Inc. (NASDAQ:CHTR) . The company announced plans to foray into the wireless service space next year, following the footsteps of rival Comcast Corporation (NASDAQ:CMCSA) .

The Wireless Plan

Charter Communications plans to utilize the Mobile Virtual Network Operator (MVNO) agreement that Time Warner Cable signed with Verizon Communications Inc. (NYSE:VZ) in 2012. Notably, Charter Communications acquired Time Warner Cable this year to become the second largest cable MSO in the U.S. after Comcast. The company plans to provide its wireless network services through the MVNO deal with Verizon. This process involves the utilization of Verizon’s wireless network to provide mobile phone service in lieu of paying a lease. Additionally, Charter Communications will try installing several Wi-Fi hotspots across cities to expand its network.

Ethernet Boom

Interestingly, the rapidly developing business services division has become a major boon for cable MSOs in the U.S. and Charter Communications has been aggressively targeting this space. Recently, the company became the third largest player in the U.S. Ethernet market after its merger with Time Warner Cable and Brighthouse Networks. We believe that cost synergies and gaining of fiber assets through the merger will give Charter Communications a formidable position in the Ethernet space.

Cautionary Note

Online video streaming service providers like Netflix Inc. (NASDAQ:NFLX) and Hulu.com pose severe threat to cable TV operators. Online video services provide an extremely cheap source of TV content. This business model is gaining momentum, especially amid volatile economic conditions and Charter Communications is no exception. Moreover, the impending launch of AT&T Inc (NYSE:T).’s over the top (OTT) service – DIRECTV Now – will exert more pressure on Charter Communications.

Price Performance

Year to date, the Zacks categorized Cable Television industry has registered growth of 14.44%. However, the stock price of Charter Communications has outperformed the industry. Notably, the company has registered growth of 36.45% in the same time period.

Charter Communications currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>