Shares of Charter Communications (NASDAQ:CHTR), a prominent cable company, witnessed an uptick on Friday, September 22, 2023, subsequent to a rating upgrade by banking and financial services firm, Wells Fargo. Analyst Steven Cahall revised his rating on Charter from Equal Weight to Overweight and increased his price target from $450 to $550, indicating a potential 23% surge from the stock's closing price on Thursday.
The rating uplift is largely credited to Charter's growth prospects, especially in rural areas. Cahall pointed out that the company's expansion in rural regions presents an opportunity for new customer acquisition. During a second-quarter earnings call in late July, Charter's CEO Christopher Winfrey declared that the company is currently the largest and fastest-growing rural provider in the nation.
Charter's CFO Jessica Fischer emphasized during the same call that the firm’s rural construction initiative is now disbursing at a steadier pace than in past years. This consistent spending is key to their strategy as the company reported a loss of 200,000 pay TV customers in its second quarter in July, which marks a slight improvement compared to a loss of 226,000 customers the previous year.
Charter also has high expectations for its Spectrum One bundle offering which was introduced in October 2022. The package provides customers with a complimentary mobile line. Cahall posits that if Charter can attain strong conversion rates with Spectrum One, it could generate high-margin revenue that enhances EBITDA (earnings before interest, taxes, depreciation, and amortization).
The cable company also recently settled a disagreement with entertainment conglomerate Walt Disney (NYSE:DIS). The dispute had deprived numerous Spectrum subscribers of access to Disney-owned channels such as ESPN and ABC. Despite Charter's offer for Disney to provide Spectrum customers with complimentary access to its streaming services, Disney declined.
As of Friday, shares of Charter were up by 0.6% to $449.53. The stock's performance this year has been noteworthy, with gains totaling 33%.
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