Charter Earnings: The Next Couple of Quarters Will Be Tough, but the Stock Looks Cheap

While the end of the federal Affordable Connectivity Program remains an issue for Charter and customer metrics remain weak, profitability was a notable positive in the firm's first-quarter results. Charter has been the biggest beneficiary of the ACP, with 5 million (about 16%) of its broadband customers receiving the subsidy. Management expects weak customer growth over the next couple of quarters, but it believes EBITDA will grow in 2024 despite the program's end. After trimming our fair value estimate to $500 recently to include an estimate of the ACP impact, we are dropping our estimate to $490, primarily on expectations for slower business customer growth. We still believe Charter shares are deeply undervalued, but we caution that uncertainty is higher than with cable peer Comcast.