Expanding Broadband Access And DOCSIS 40 Will Fuel Digital Transformation

Key Takeaways

• Expanding rural broadband, government subsidies, and integrated service bundles boost customer growth, retention, and recurring revenue through higher data usage and more stable earnings.
  
• Technology upgrades and operational efficiencies reduce costs, while disciplined spending and share repurchases support margin expansion and long-term shareholder value.
  
• Cord-cutting, increased broadband competition, high capital spending, and significant debt together threaten Charter's revenue stability, customer retention, and long-term financial flexibility.

Catalysts

Operates as a broadband connectivity and cable operator company serving residential and commercial customers in the United States.

• Charter’s expanding broadband footprint into rural and previously underserved areas, enabled by government subsidies and ongoing construction, positions the company to tap into structurally higher population growth outside urban cores, driving incremental revenue growth and expanding the total addressable customer base over the next several years.
  
• Sustained increases in consumer and business demand for high-speed data—driven by trends like streaming, remote work, IoT adoption, and the rise of smart home technologies—are boosting average data usage per broadband customer and elevating revenue per user, providing a long-term foundation for strong revenue and ARPU growth.
  
• Continued investments in DOCSIS 4.0 technology upgrades and AI-driven operational efficiencies are reducing service costs, minimizing customer service contacts, and streamlining field operations, which together support margin expansion and higher EBITDA as capital intensity declines post-2025.
  
• Charter’s integrated offering of broadband, mobile (Spectrum Mobile), and evolving video services with seamless bundling is increasing customer stickiness, lowering churn, and enabling higher ARPU through the cross-selling of services, generating more stable recurring revenue and supporting upward earnings trajectories.
  
• The company’s strategy of disciplined capital allocation—with a sharp reduction in capital expenditures projected after 2025 plus accelerating share repurchases—is set to drive significant free cash flow growth and higher earnings per share, amplifying long-term shareholder value creation.

Charter Communications Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Charter Communications compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Charter Communications's revenue will grow by 2.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 9.4% today to 12.2% in 3 years time.
• The bullish analysts expect earnings to reach $7.2 billion (and earnings per share of $64.52) by about July 2028, up from $5.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, up from 10.5x today. This future PE is lower than the current PE for the US Media industry at 20.2x.
• Analysts expect the number of shares outstanding to decline by 1.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.04%, as per the Simply Wall St company report.

Charter Communications Future Earnings Per Share Growth

Risks

• The accelerating trend of cord-cutting and the migration to streaming platforms continues to reduce Charter's legacy pay-TV subscriber base, leading to a year-over-year 7.3% decline in video customers and pressuring video revenue, which undermines long-term revenue streams for the company.
  
• Ongoing fiber overbuilds and rising penetration of fiber-to-the-home projects by both incumbents and new entrants threaten Charter with persistent broadband market share loss and possible average revenue per user compression, risking broadband revenue and customer growth even as current fiber overlap is said to be expanding at a steady pace.
  
• The expansion of government-supported and municipal broadband, alongside the availability of public subsidies in rural areas, intensifies competition and could erode Charter's traditional dominance in certain markets, which in turn may limit future revenue growth and profitability.
  
• Charter's requirement for substantial capital expenditures to upgrade its infrastructure, including network evolution initiatives like DOCSIS 4.0 and rural buildouts, sustains high capital intensity that may suppress free cash flow and negatively affect net margins over the long term, especially if revenue growth remains slow.
  
• High leverage, with $93.6 billion in debt principal and management’s stated intent to maintain net debt at four to four and a half times adjusted EBITDA, creates elevated financial risk, with growing interest expenses that could erode earnings and reduce financial flexibility in the event of industry downturns or unfavorable market shifts.

Valuation

• The assumed bullish price target for Charter Communications is $587.73, which represents two standard deviations above the consensus price target of $442.67. This valuation is based on what can be assumed as the expectations of Charter Communications's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $600.0, and the most bearish reporting a price target of just $315.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $58.7 billion, earnings will come to $7.2 billion, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 9.0%.
• Given the current share price of $395.85, the bullish analyst price target of $587.73 is 32.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.