JPMorgan analyst Sebastiano Petti noted that Charter's management attributed the slowdown to increased availability of fixed-wireless access (FWA) and intensified promotional activities from both FWA and fiber providers. However, Petti pointed out that competition from FWA and fiber has been growing for a while, making it difficult to fully explain the company's underperformance in the last quarter.
Due to these concerns, Petti downgraded Charter shares from overweight to neutral in his latest client note. He also revised his price target down to $370 from $445.
As a result of the disappointing news, Charter shares experienced a 16.5% decline in Friday's session, marking the worst one-day percentage drop in the company's history.
The Challenges Faced by Wireless Companies in the Home-Internet Market
Wireless companies have been making efforts to provide home-internet services to customers. However, recent data suggests that some companies are facing challenges and experiencing soft numbers in terms of net additions.
Verizon Communications Inc. deployed additional C-Band capacity recently, but its Fixed Wireless Access (FWA) net addition numbers were disappointing. On the other hand, AT&T Inc. expanded access to its Internet Air service in the fourth quarter. However, it seems that this service has more overlap with Comcast Corp. than with Charter.
Analyst John Petti predicts that Charter will face total broadband net losses of 100,000 for 2024, contrary to his previous expectation of 150,000 net additions. While CEO Chris Winfrey expects a return to more normalized internet growth over time, Petti believes that the broadband losses will continue into 2025.
Additionally, concerns arise around the Affordable Connectivity Program (ACP), a government initiative aimed at providing financial assistance for internet service. The program's funding is expected to be depleted by April, and it remains uncertain whether any changes or additional funding will be provided. This uncertainty creates an overhang on shares until a resolution becomes clearer.
Petti's concerns are echoed by Wells Fargo analyst Steven Cahall, who recently stepped back on Charter shares.
In the past two years, Charter's stock has seen a significant decline of about 50%, while the S&P 500 has experienced a 10% increase. Similarly, rival company Comcast has also seen a decline of 9% during the same period.
It is evident that wireless companies face obstacles in the home-internet market, and resolving these challenges will require careful consideration and strategic planning moving forward.