Charter Communications Downgraded On Stiff Competition

On Aug 30, Zacks Investment Research downgraded leading U.S. cable multi-service operator (MSO), Charter Communications (NASDAQ:CHTR), Inc. (NYSE:T) by a notch to a Zacks Rank #3 (Hold).

Rationale Behind the Downgrade

Online video streaming service providers like Netflix Inc. (NASDAQ:NFLX) , Hulu.com and Verizon Inc.’s (NYSE:VZ) Go90 provide stiff competition 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 is no exception to the trend. Moreover, the impending launch of AT&T Inc.’s (NYSE:T) over the top (OTT) service – DIRECTV Now – will pile more pressure on Charter.

Optimal Spectrum Use

Charter is taking various initiatives to enhance its Spectrum products. The company developed its cloud-based user interface, Spectrum Guide, to run on all set-top boxes that offer advanced video navigation. The company is also developing Charter TV applications for its video-on-demand content. Additionally, Charter has independently certified its new WiFi router to provide wireless services. Additionally, services like Spectrum WiFi, and World Box should be able to gain residential customers given their attractive features and pricing.

Interestingly, the rapidly developing business services division has become a major boon for cable MSOs in the U.S. and Charter has been aggressively targeting this space. Recently, it 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 gain of fiber assets from the merger will give Charter a formidable position in the Ethernet space.

CHARTER COMM-A Price

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