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Charter Communications stock (NASDAQ:CHTR) reversed premarket declines and rose 4.9% Friday after the cableco topped GAAP profit expectations but raised some concerns around the industry's topic du jour: whether customer growth is slowing too much.
Charter added a net 172,000 residential Internet subscriptions, short of analyst expectations - but investors may be taking that in stride, even though rival Comcast (CMCSA +2.3%) surprised to the upside on that measure yesterday.
Revenue was essentially in line at $13.21 billion (up 4.7%); highlights there were in residential growth of 5.1%, vs. commercial revenue growth of 4.8%, and mobile revenue growth of 47.5%; those helped to offset a 28.2% drop in advertising sales revenue.
EBITDA rose 7.7% to $5.4 billion. And free cash flow rose to $2.3 billion from $2.1 billion in the year-ago quarter. (Full-year free cash flow jumped to $8.7 billion from a previous $7.1 billion.)
Revenue by segment: Residential Internet, $5.42 billion (up 11.6%); Residential Video, $4.41 billion (down 0.3%); Residential Voice, $396 million (down 11.9%); Small/Medium Business, $1.05 billion (up 5.8%); Enterprise, $643 million (up 3.2%); Commercial, $1.7 billion (up 4.8%); Advertising sales, $448 million (down 28.2%); Mobile, $632 million (up 47.5%).
"In 2022, we remain focused on driving additional customer growth by offering better services while saving customers money on their total communications spend, driving EBITDA growth, free cash flow growth and shareholder value," says CEO Tom Rutledge.
The broadband adds may be a little disappointing, acknowledges bullish analyst Jonathan Chaplin at New Street Research, but that may be in comparison to Comcast's report yesterday, and he's staying "constructive" on the company "while acknowledging that a difficult transition lay ahead given investors’ singular focus on broadband adds." He points to better-than-expected EBITDA and free cash flow and has an $820 price target, implying 39% upside.
One reason Comcast might be coming off relatively better this week? Comcast had lowered its broadband expectations during the December conference season, but Charter didn't, Wells Fargo notes. Meanwhile it looks like Comcast and Charter look "highly correlated" when it comes to net adds, analyst Steven Cahall writes.
There's "no big surprise" in the slowdown in broadband additions, he says; he has an Underweight rating and a $603 price target (or 2% upside).
Check out the earnings call transcript for more details.