Key insights
- The author presents a bullish case for CHTR, citing strong free cash flow, aggressive share buybacks, and high short interest as potential catalysts. While acknowledging concerns about debt and a possible acquisition, recent insider buying and a compelling valuation in a flat-revenue environment are highlighted as positives. The analysis suggests a medium-high reward opportunity with low-medium risk, potentially influencing positive sentiment towards the stock.
Hey y'all, curious about your takes on CHTR.
Free cash flow is 5.0B against a market cap of 18.2B. They have a track record of buying back~4B per year in shares, so that would be a 22% increase in share price on buybacks alone over the next 12 months.
Nominal debt is high at 94B but is actually trending down as a percentage of profit. Debt/EBITDA is at 4.15x, compared to >4.4x from 2022-2024. They have a nice chart on their latest earnings release along with other debt statistics.
Short interest is 24% of float and days to cover is 6, so a short squeeze is possible if good news triggers an unexpected positive movement in share price. Add in the fact that CHTR is removing 5% of the float each quarter via share buybacks, things could get juicy in a hurry.
The headline of large broadband customer losses is causing major downward price movement, but total revenue is only down 1% due to a major gain in mobile customers. Even in a flat-revenue environment, the valuation is compelling.
One question mark is the Cox acquisition. For a yearly gain of 1.2B in FCF and estimated annual cost savings of 500M from synergies once Cox is integrated, CHTR would assume 12B of additional debt and a ~30% share dilution.
The other major question mark is what happens to borrowing costs if inflation rises over the next decade. A higher interest rate environment from the Fed to the inflation would substantially increase debt servicing costs, eating into cash flows. At the same time, the real value of the debt would decrease in an inflationary environment.
One major positive is a recent cluster of open market insider share purchases on 4/28. The CEO bought $1.2M in shares, one director bought $1.0M and another bought $175k. These purchases were at a share price between $172-176 per share, so ~20% higher than the share price of $148 at the time of writing.
I would consider this a low-medium risk, medium-high reward opportunity. I evaluated the maximum amount I would be willing to invest in CHTR and put half of that in at $148 share price, and will increase my position if share price drops. I think around $100 is a true floor, as at that price an investment firm would buy it out.