On Tuesday, BofA Securities updated its stance on Charter Communications (NASDAQ:CHTR), reducing the stock's price target from $350.00 to $315.00, but maintaining a Neutral rating. The revision reflects the anticipated consequences of the Affordable Connectivity Program (ACP) ending in April.
The analyst predicts that the first quarter of 2024 will see an effect from the reduction in ACP sign-ups as the program concludes, with a more significant impact expected in the second and third quarters of 2024.
According to the firm's analysis, approximately 10% of Charter's over 5 million ACP subscribers may leave the service. Meanwhile, around 30% of subscribers are expected to remain unaffected, whereas the rest might opt for lower-tier plans or take advantage of promotional discounts.
The commentary highlighted concerns about the near-term growth of Charter Communications, indicating that the winding down of the ACP could lead to lower gross additions in the short term. The ACP has been a federal initiative designed to help low-income households afford internet service, and its conclusion is set to influence Charter's subscriber dynamics.
Charter Communications, a leading broadband connectivity company and cable operator, has been part of the ACP, which has supported broadband access across the United States. With the program's impending end, the company is expected to navigate changes in its subscriber base and revenue.
The updated stock price target of $315.00 by BofA Securities takes into account these anticipated changes in Charter Communications' operations as the company adapts to the post-ACP landscape. The Neutral rating suggests that the firm maintains a cautious stance on the stock amidst these expected developments.
InvestingPro Insights
As Charter Communications (NASDAQ:CHTR) prepares for the post-Affordable Connectivity Program (ACP) landscape, it's essential to consider the company's financial health and market performance.
The adjusted market capitalization of Charter stands at $44.09 billion, with a compelling price-to-earnings (P/E) ratio of 8.93, indicating that the stock may be undervalued compared to its earnings. This is further supported by an adjusted P/E ratio for the last twelve months as of Q4 2023, which is slightly lower at 8.72.
Despite the challenges ahead, one of the InvestingPro Tips highlights that management has been aggressively buying back shares, a signal that could indicate confidence in the company's future performance.
In addition, Charter is recognized as a prominent player in the Media industry, which may provide a competitive edge as it adjusts to changes in the market. The company's revenue has grown by a modest 1.08% over the last twelve months as of Q4 2023, with a gross profit margin of 38.83%, showing the company's ability to maintain profitability.
For investors seeking more insights, additional InvestingPro Tips are available, including an analysis of Charter's short-term obligations versus liquid assets and a review of the stock's performance near its 52-week low. To access these tips and more, visit https://www.investing.com/pro/CHTR and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 9 more tips available on InvestingPro, investors can gain a comprehensive understanding of Charter's potential in the current market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.