Wunderlich Boosts Target On Charter Communications By $50 To $330

Wunderlich’s Matthew Harrigan believes that Charter Communications, Inc. CHTR has meaningful financial and operational leverage due to “increasing net video and broadband gains, especially off lowering churn and reducing concomitant transaction costs.”

Harrigan maintains a Buy rating on the company, while raising the price target from $280 to $330.

Positive Expectations

“We remain enthused on the cable technology roadmap, Spectrum brand marketing, and eventual further wireless benefits – even with the Q3 CC angst,” the analyst mentioned, while adding, “Rutledge anticipates across the board Spectrum rebranding nationally by March 2017, with early launches in Los Angeles and Texas and November 2016 introductions in New York and Florida.”

Harrigan believes this represents a “homogenous” sales, marketing and pricing template that is expected to normalize higher growth, even if the impact is realized in stages, rather than in 2017 itself.

Estimates Revised

Harrigan revised the EBITDA estimates, while raising the 2016–2020 OCF growth estimate from 7.4 percent to 8.2 percent, with 15.1 percent/13.5 percent 2020/permanent capex intensity to sales, which the analyst believes could prove conservative.

The residential activity estimate has been raised to 500,000 video additions and 2 million broadband additions, which suggests 11 percent upside potential to the fair value.