Shares of Charter Communications Inc. (CHTR) may have finished Monday’s trading session lower, but that hasn’t stop one Wall Street bull from raising its price target on the nation’s second-biggest cable operator.
Citing continued confidence in Charter’s ability to grow its broadband and video market share, Guggenheim raised its price target on shares of Charter to $360 from $305. Shares of Charter closed Monday’s session at $323.02, down $1.54, or less than 1%. At $360, the analyst is betting shares will increase around 11%. Guggenheim has a buy rating on shares of Charter. Guggenheim’s Michael Morris said in a research note covered by StreetInsider.com that in addition to gaining more broadband and video customers, Charter’s systems have “strategic value should the video, broadband and wireless industries further consolidate."
Rumblings of a Verizon Deal
For a few weeks now, speculation has been growing that Charter will be the next takeout target. In late January, The Wall Street Journal reported Verizon Communications Inc. (VZ) is looking to acquire the second-place cable operator. Citing unnamed sources, the Journal reported Verizon Chief Executive Lowell McAdam has reached out to Charter executives and is working with advisers to look at a potential deal between the two. The paper noted it’s not clear if Charter Chief Executive Tom Rutledge would be open to a deal. Later that same day, sources told CNBC that "no significant talks" were taking place between Charter and Verizon. (See also: Charter Stock Surges on Report of Verizon Interest.)
While it’s not clear if Verizon will move ahead with a deal to acquire Charter, many investors and analysts are expecting more consolidation in the cable and telecom markets thanks to a new M&A-friendly administration under President Donald Trump. With the smartphone market getting saturated and consumers fed up with their cable and satellite providers, more M&A is expected as telecom providers morph into content providers. That’s the idea behind AT&T’s proposed merger with Time Warner Inc. (TWX) and the launch of its DirecTV Now over-the-top streaming video service.
Guggenheim’s move to increase Charter’s price target comes just a few days before the cable operator reports fourth-quarter earnings. Analysts are looking for Charter to weigh in with EPS of $1.06, according to Zacks Investment Research, which would be much better than the $1.21 a share it lost in the year-ago fourth quarter.