Why Did An Analyst Bring Charter Back To Buy?


What a difference an election makes.

One month ago, respected Wall Street research firm Moffett Nathanson lowered its rating on Charter Communications from “buy” to “neutral.”

The move was considered a valuation call by the firm.

Last Thursday, Moffett Nathanson pretty much said, “Never mind,” and returned Charter to a “buy.”


“At the time, Charter’s shares were flirting with our target price, and we were concerned that Charter’s investors were unprepared for an inevitable announcement that Charter would have to divert at least some portion of its free cash flow to wireless,” the firm said in a report. “Even a value accreditive investment would necessarily slow, at least modestly (and temporarily), Charter’s share repurchases.”

So, what transpired?

“The stock pulled back, Charter has signaled its intent to pursue wireless and … well, there’s a new sheriff in Washington,” the firm explained.

Moffett Nathanson said it hadn’t thought about a Trump presidency. But, “this much is very clear: the regulatory risk for cable stocks is now dramatically lower.”

With a risk of a veto now gone, Title II regulation could now even see a Congressional roll-back, the firm added.

Thus, Moffett Nathanson is raising its price target for Charter to $337, based on a higher target multiple of 8.75 times 2020E EBITDA. That’s up from $305.