On Monday, Evercore ISI adjusted its price target on shares of Charter Communications (NASDAQ:CHTR), reducing it to $350 from the previous $410, while maintaining an Outperform rating on the stock. The firm's statement highlighted a growing confidence in Charter's ability to retain the majority of its Affordable Connectivity Program (ACP) customers, thanks to a new retention strategy that offers a complimentary mobile line for one year.
According to Evercore ISI, this initiative could significantly mitigate the risks associated with the ACP and potentially attract new customers. However, it is also noted that this could spread the promotional challenges into mid-2025. Charter's management has expressed confidence in growing EBITDA throughout 2024 and has discussed plans to reduce debt levels to around the midpoint of their 4-4.5x target range, as opposed to the higher end which they have historically preferred.
While this approach may limit the potential for stock buybacks, Charter anticipates continuing its share repurchase program. Evercore ISI took a broader perspective, recognizing Charter's position as a leading connectivity provider that is gaining market share. The firm anticipates a positive turn in subscriber numbers and free cash flow after the current investment cycle concludes.
The analysis acknowledged the difficulty in improving market sentiment towards Charter until there is a tangible improvement in operating trends, the ACP concerns are resolved, and there is a more evident trajectory towards enhanced EBITDA and free cash flow growth. Consequently, Evercore ISI has lowered its price target, basing the new figure on a 6.8x multiple of Charter's estimated 2024 enterprise value to EBITDA.
InvestingPro Insights
In light of Evercore ISI's updated price target on Charter Communications (NASDAQ:CHTR), investors may find additional context through real-time data and insights from InvestingPro. Charter's management has been actively repurchasing shares, signaling confidence in the company's value. This aligns with the firm's strategy to retain ACP customers and grow EBITDA, as mentioned by Evercore ISI. Despite a challenging period, analysts project Charter to remain profitable this year, supported by a strong performance over the last twelve months.
InvestingPro Data indicates a market capitalization of $42.85 billion and a P/E ratio that stands at 8.48, suggesting that the stock is trading at a reasonable valuation compared to its earnings. Notably, Charter does not pay dividends, emphasizing its focus on reinvesting earnings into the business and share buybacks. The company's revenue growth has been modest at 0.29% over the last twelve months as of Q1 2024, reflecting the competitive nature of the media industry.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, with a total of 9 tips that provide insights such as the company's liquidity position and short-term challenges. Readers can explore these tips and more by visiting InvestingPro, and can benefit from an extra 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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