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Why Charter Communications Stock Fell Despite Q1 Beat

Charter Communications (CHTR) reported Q1 2022 results that increased from a year ago and compared favorably with Wall Street estimates. However, CHTR stock still declined more than 7% on April 29, after the results were released. 

Connecticut-based Charter is a telecom and media company. It offers its services under the Spectrum brand. Its main businesses include broadband and cable television services.

Q1 Numbers at a Glance

Revenue jumped 5.4% year-over-year to $13.2 billion and met the consensus estimate. EPS of $6.90 rose from $4.11 in the same quarter the previous year and beat the consensus estimate of $6.57.

What Triggered the Selloff in Charter Stock?

Although Charter’s earnings generally looked good, investors appeared worried about the company’s future as it continues to bleed important customers. Charter lost 123,000 residential video customers in Q1, bringing total residential video customers down to 15.1 million from 15.5 million a year ago. The video business is the company’s second-largest revenue source after broadband.

Charter-Comcast Joint Venture

Faced with a shrinking Pay-TV customer base, Charter and Comcast (CMCSA) have teamed up to bolster their chances in the streaming video market. Charter plans to invest $900 million in the joint venture in an arrangement that would give its customers access to Comcast’s Flex streaming platform and hardware. The partners will have equal stakes in the joint venture. 

Wall Street’s Take

On April 29, Truist Securities analyst Gregory P Miller reiterated a Hold rating on Charter stock but lowered the price target to $450 from $600. Miller’s new price target suggests 5% upside potential.

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on six Buys versus six Holds. The average Charter Communications price target of $583.77 implies 36% upside potential to current levels. Shares have declined 37% over the past six months.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Charter Communications, with 9.3% of portfolios tracked by TipRanks increasing their exposure to CHTR stock over the past 30 days.

Key Takeaways

The traditional Pay-TV business’s best days seem to be behind it, and Charter is trying to adjust accordingly. Diversification into the wireless market and the partnership with Comcast to explore additional streaming opportunities show a company pursuing a future beyond the cable television market. 

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