Oh Come On!
Investor, Venture Capital Background
Charter Communications is now worth owning at prices last seen in 2013, with a margin of safety coming simply from lower capex. That marks a turn from the earlier view that buybacks at excessive prices made the stock unattractive. Comcast is likewise too cheap to pass up, helped by its upcoming split, and Charter's repurchases can resume within days. x.com x.comÂ
Charter Communications destroyed value by buying back stock at excessive prices. Despite providing an essential service to millions of households, the stock is flat over 12 years after an 82% drawdown so far. It spent over $60 billion on buybacks above $300 a share, while its market cap is now $20 billion at $150; as dividends, that would have been about $450 a share. Most investors pay no tax, companies always think their stock is cheap, and returning cash should be the default. x.com x.comÂ
Charter is a very asymmetric bet at 2.35x consensus 2027 EPS, letting it buy back shares massively at a P/E of about 2. A modeled bad case with much bigger, continued subscriber losses still yields about $30 of owner earnings. Charter can offset lost subscribers by raising prices, capturing M&A synergies and paying down debt, with many years of deleveraging before EBITDA would fall 20% and debt covenants would bite. x.com x.com x.comÂ
Charter Communications is covered in a new, free-to-read note. x.comÂ
Charter's stock-based compensation of a little over half a billion dollars a year is a real cost to shareholders that should come out of free cash flow, since it dilutes their ownership. One mitigating point on the debt: John Malone was right to borrow very long term, with over 90% at fixed rates and some bonds running into the 2060s, per a post the author replies to. x.com x.com x.com x.comÂ
Comcast and Charter now have a clear catalyst path to higher free cash flow per share from what were already the cheapest valuations in the S&P 500. Comcast's NBCUniversal spinoff, Brian Roberts stepping down and former CFO Michael Angelakis returning as CEO look like a precursor to merging Comcast with Charter, possibly next year once Charter's Cox deal closes. Netflix may buy NBCU at a healthy multiple. Both are very crowded shorts, echoing Warner Bros. Discovery in summer 2025. x.com x.com … Show more
Charter is drowning in debt, and that leverage outweighs its cash-flow appeal. @k3ithmccullough puts Charter at a 25% free-cash-flow yield by 2028. The most bullish point is that capex is expected to come down, but on a quick look the heavy debt load makes the stock look very poor. x.comÂ
Charter looks like a value buy at a forward P/E of 3.8, but the risk of further big drops makes it a pass. The stock fell 24% on its earnings reaction, back to its 2016 price. x.comÂ
Charter Communications operates in a structurally declining market and spends capex just to keep EBITDA flat at best. Fintwit's interest in the stock was misguided, and it is not a comparable case to the one @PineTreeFlag raised. x.comÂ
