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Why Charter Communications Stock Gained 14% in October

By Jeremy Bowman – Updated Nov 1, 2019 at 5:37PM

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An analyst upgrade and a strong earnings report boosted the cable stock last month.

What happened

Shares of Charter Communications (CHTR -3.68%), the nation's No. 2 cable provider, were climbing higher last month on a better-than-expected earnings report and an analyst upgrade. According to data from S&P Global Market Intelligence, the stock finished October up 14%.

As the chart below shows, shares gained in a few separate stages during the month, with the biggest jump coming toward the end of October on its earnings report.

CHTR Chart

CHTR data by YCharts.

So what

Charter kicked off the month with a bang after KeyBanc Capital Markets lifted its rating from sector weight to overweight. Analyst Brandon Nispel said the company "remains well-positioned to benefit from increased penetration rates in broadband, and an overall mix shift to higher-margin 'growth business.' "  He also said Charter would get a boost from higher prices. Shares rose 2.7% on the news.

Cable cords in the back of a cable box.

Image source: Getty Images.

The stock gained again starting on Oct. 15, climbing 4.5% over a three-day stretch after the company priced $2 billion in loans, showing healthy demand for its debt.

Then, on Oct. 25, the stock jumped 6.3% after Charter reported third-quarter earnings, saying customers increased by 310,000 as it rapidly added broadband subscribers while losing cable viewers. Overall revenue increased 5.1% to $11.45 billion, slightly ahead of estimates at $11.41 billion. On the bottom line, earnings per share fell from $2.11 to $1.74 as results a year ago were helped by a pension remeasurement gain, but that still beat analyst estimates at $1.66. 

CEO Tom Rutledge said, "Our strategy of offering high-quality products with good service at attractive prices is working, and continues to produce strong customer relationship growth."

Now what

The stock has been a surprise winner this year, with shares now up 67%. Traditional cable providers are finding success by pivoting to broadband internet, which should continue to see gains as video streaming increases in popularity. The company also recently got into the mobile data competition with the launch of Spectrum Mobile last year, and it added 276,000 new mobile lines in the third quarter, making it a valuable add-on business. 

While the stock looks expensive according to conventional metrics, profitability is expected to surge as Charter eases back from capital expenditures and sees growth from its new mobile business.

 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Charter Communications, Inc. Stock Quote
Charter Communications, Inc.
CHTR
$321.66 (-3.68%) $-12.30

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