1. Charter Communications, Inc. (NASDAQ:CHTR)
Short Interest as % of Shares Outstanding: 8.41%
Number of Hedge Fund Holders: 48
Charter Communications, Inc. (NASDAQ:CHTR) functions as a major provider of broadband and cable services for both residential and business clients across the US. As a known company in the 5G sector, its Spectrum Mobile service plays a key role in its efforts to improve connectivity solutions.
The company provides a range of subscription-based services including internet, video, mobile, and voice options. The offerings include a comprehensive suite of broadband connectivity, in-home WiFi, voice communication services, and other broadband solutions.
In June 2023, it chose Nokia to assist with 5G connectivity for Spectrum Mobile users, which represented a significant advancement in its 5G rollout plans. The investment in 5G technology aligns with a wider trend among cable operators to deploy Citizens Broadband Radio Service (CBRS) spectrum. The CBRS spectrum allows the company to develop 5G networks that can ease up traffic from their rented mobile networks, which improves the service experience for their mobile subscribers.
Charter Communications (NASDAQ:CHTR) has recently navigated a challenging financial landscape, which is reflected in a dip in its stock performance. For the first quarter, the company reported a stagnant revenue at $13.7 billion and a modest 8% rise in net income to $1.1 billion. Although net income saw growth, the figures fell short of what analysts had anticipated, which impacted investor sentiment.
In the second quarter, the company experienced a decline in its total internet customer base, dropping by 149,000 to 30.4 million. Despite this downturn, the company’s revenue was $13.7 billion, which surpassed the forecasted $13.6 billion. It tops our list of the worst 5G stocks to buy according to short sellers.
On a positive note, the company’s mobile sector grew by 557,000 lines, reaching a total of 8.8 million. Its EBITDA rose by 2.6% to $5.7 billion. Additionally, EPS climbed from $8.05 to $8.49, which beat the anticipated $7.98, partly due to share buybacks. CEO Chris Winfrey highlighted ongoing efforts to enhance operational efficiencies and service capabilities, which have contributed to improved EBITDA.
Analysts remain cautious about the company’s future. On September 10, Citi upgraded Charter Communications (NASDAQ:CHTR) to Neutral from Sell with a $350 price target. The upgrade is owed to a reassessment of the company’s valuation and a more stable broadband operating environment for the third quarter. The improvement in the Affordable Connectivity Program (ACP) retention also indicates better-than-expected results in this area, as per the firm.
Nonetheless, the firm still leans towards large-cap telecom stocks over cable stocks, though telecom valuations are beginning to acknowledge stronger fundamentals in wireless sectors.
Adding to the company’s prospects, it recently announced a significant partnership with Warner Bros. Discovery. The agreement will include the premium Max (Ad Lite) service, including all HBO and Max content as well as Discovery+, within Spectrum TV Select packages at no additional cost. The new deal represents a major shift for the company and places it as a more competitive player in the evolving media landscape.
In Q2, 48 hedge funds had investments in Charter Communications (NASDAQ:CHTR), with positions worth $4.49 billion. Harris Associates is the top investor in the company as of the second quarter and has a stake of nearly $1.9 billion, as of the second quarter.
Parnassus Investments stated the following regarding Charter Communications, Inc. (NASDAQ:CHTR) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE and Charter Communications, Inc. (NASDAQ:CHTR). NICE is a leading cloud contact center software company. Charter’s stock had fallen due to near-term concerns, which we believe will not have a major impact on the long-term value of the business. Charter Communications has had several issues that created short-term uncertainty. We assessed that these issues have limited impacts on the long-term value of the business and initiated a position to take advantage of the stock’s historically low valuation.”
While we acknowledge the potential of Charter Communications, Inc. (NASDAQ:CHTR) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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