Shares of Charter Communications (NASDAQ:CHTR) gained 57.3% in 2016 according to data from S&P Global Market Intelligence.
In mid-May, Charter closed the acquisitions of Time Warner Cable and Bright House Networks. The two transactions created an industry titan with more than 25 million customers across 41 U.S. states. That's huge in an industry where economies of scale play a huge role in network operations and negotiations over content licenses.
The new Charter is among the three largest TV broadcasting systems in America, and a significant force in the market for broadband internet services as well.
Investors and analysts have rewarded Charter's newfound scale with a large share price boost, but fellow Fool Dan Kline is not convinced that the good times will last.
If the 2016 surge rested purely on Charter's growth by acquisition, the company must now defend its massive valuation by making the most of its opportunities. That means holding on to a skeptical customer base from the Time Warner Cable and Bright House camps, and maybe even adding subscribers in spite of the consumer trend toward cord-cutting.
That's no easy task, and Charter has indeed been losing video subscribers in the post-merger market. Like the rest of the traditional cable TV industry, this company is becoming less of a media broadcaster and more of a pipeline to online services. That's a fine business model, but Charter must adjust to this new reality.