9. Charter Communications, Inc. (NASDAQ:CHTR)
Number of Hedge Fund Holders: 61
Charter Communications, Inc. (NASDAQ:CHTR) is a renowned cable and internet company that serves both residential and commercial clients. The company offers services such as voice, television, and the internet.
Charter Communications, Inc. (NASDAQ:CHTR) posted impressive results for the third quarter of 2024 in most categories, including revenue, EBITDA, and free cash flow. Specifically, mobile service income increased by 37.9%, while advertising revenues rose by 17.7%. The company’s free cash flow (FCF) in particular has been a topic of discussion. Following a fall in 2023, FCF is predicted to rebound significantly by 2026. Some experts predict that Charter’s FCF will reach approximately $8.0 billion by 2027, up from less than $3.0 billion in 2024.
Charter Communications, Inc. (NASDAQ:CHTR) also intends to acquire Liberty Broadband in an all-stock deal, an acquisition that is expected to boost liquidity and direct ownership for Liberty Broadband stockholders. The deal is scheduled to finalize in late June 2027.
Brennan Asset Management stated the following regarding Charter Communications, Inc. (NASDAQ:CHTR) in its Q4 2024 investor letter:
“Charter Communications, Inc. (NASDAQ:CHTR): Still Hated…But Progress Continues and CHTR/Liberty Broadband (LBRDK) Terms Finalized: We discussed Charter (CHTR) in our 2024 Q1 letter and then reviewed CHTR’s offer to repurchase Liberty Broadband shares in our Q3 2024 letter. CHTR continues to show operational progress. While there is likely to be some continued Affordable Connectivity Program (ACP) noise during the early part of 2025, CHTR has done an admirable job in retaining customers, and total losses are far lower than originally feared. While the stock (frustratingly) will bounce around with small changes in quarterly broadband additions/losses versus expectations, we still believe that CHTR’s ultimate success will come down to whether they can create packages that encourage customers to jointly consider broadband and cell phone prices rather than mentally segregating the two bills. As we previously discussed, we are cautiously optimistic that CHTR’s more aggressive broadband/bundling packages can do just that. We also believe that CHTR’s streaming aggregation product could be another positive differentiator. During its third quarter conference call, CHTR announced that it did not expect to be a meaningful participant in the Broadband Equity, Access, and Deployment (BEAD) program. This cutback in expansionary capex after 2025 likely means a more rapid return to aggressive share repurchases, especially once the company’s network investments are completed in 2027.
Separately, CHTR and LBRDK came to terms with the merger proposal that we discussed in our third quarter letter. The final deal was probably viewed somewhat disappointingly by LBRDK investors, considering that the exchange ratio was closer to CHTR’s original proposal — 0.236 shares of CHTR for each LBRDK share with GCI Communications (GCI) not included versus LBRDK’s proposal for 0.29 CHTR/LBRDK including GCI. That said, the part that most frustrated some was disclosure that the LBRDK/CHTR deal will not close until June 2027. This later closing was designed so LBRDK could sell down CHTR and deleverage prior to the merger, but this also means that LBRDK likely will trade at a discount until closer to deal closing. While we understand the criticisms, CHTR was the only likely buyer for LBRDK, and this deal will simplify CHTR’s capital structure and ultimately allow a collapse of the LBRDK discount.”
