Charter Communications shares rose $4.65 each (3.02%) in early trading Tuesday after Canaccord Genuity analyst Gregory Miller raised his rating on the stock to “Buy,” adding that he expects the mid-sized market cable operator to benefit from the pending Comcast-Time Warner Cable merger.
In his note, Miller expects Charter to report strong Q4 results Thursday (Feb. 5), growing total revenue and cash flow by 7.8% and 6% respectively. Miller also predicts Charter will lose about 10,000 video customers in the period, finishing the year with 4.15 million customers.
“We believe strategic initiatives taken over the last year have created a solid foundation for future revenue and EBITDA growth, while declining capital intensity following a 2014 marked by elevated investment should enable more significant free cash flow growth in 2015 and beyond,” Miller wrote.
Miller also is confident that the Comcast-Time Warner Cable merger will pass regulatory muster, meaning that Charter will receive about 1.4 million additional customers as a result of previously announced swaps, sales, and spinoffs after the close of the deal.
“Despite concerns over much-speculated Title II-based broadband rules about to be released by the FCC, we continue to believe the deal will close and the most onerous provisions of Title II forborn,” Miller wrote.
Even if the deal doesn’t go through, Charter is in the best position as a potential acquirer of TWC or of other cable operators, Miller wrote. His “buy” rating also carries a $182 per share 12-month price target, an 18% premium to Charter’s $154 per share close Feb. 2.
Charter shares rose as much as $4.72 (3%) each to $158.72 per share in early trading Tuesday. The stock was trading at $158.65 (up $4.65 each, or 3.02%) per share at 1:18 p.m.