Charter stock might not be 'Starlink roadkill' as SpaceX threat dims

Charter Communications shares may be down but they aren’t out, even as the market has seemed to cede the broadband battle to Elon Musk’s Starlink.

In a research note on Wednesday, Benchmark Equity Research Analyst Matthew Harrigan maintained a Buy rating on the shares and reiterated his price target of $380, or 194% upside from current trading levels.

The stock was up 1% at $129.13 in midday trading Wednesday.

Charter shares haven’t had it easy. The stock has declined 38% this year and is down 84% from its record closing high of $821.01 from September 2, 2021.

A big part of the recent decline has been that the market is “clearly communicating a high likelihood for a rapid derailment of Charter’s converged broadband mobile business model,” according to Harrigan, and investors are weighing whether Charter will become “Starlink roadkill.”

There has been a growing wave of Wall Street sentiment that SpaceX’s Starlink satellite service will take market share from Charter, Comcast, and others. Starlink is expected to introduce a broadband alternative later this decade.

Charter, which operates Spectrum Internet, and Comcast, which operates Xfinity, are the leading cable internet service providers in the U.S., while AT&T and Verizon Communications are the largest fiber internet providers.

In another sign that sentiment may be shifting, AT&T stock rose 3% on Wednesday after the wireless carrier topped analysts’ second-quarter earnings target, potentially helping to assuage fears that Starlink could also disrupt the wireless market.

Harrigan argues that Charter still has a highly competitive network with advantages in important areas such as Wi-Fi and a well-articulated pricing and packaging strategy.

“There is an increasing disconnect between even the lowest analyst estimates throughout the remaining decade and the stock’s valuation,” Harrigan argues, and he sees a moderation of the belief that Starlink will triumph in a “winner takes all” market battle.

That’s what he’s betting on with his $380 Charter price target. Now investors will have to decide if Benchmark is right, or if the stock is indeed doomed to become Starlink roadkill.

Write to Kit Norton at [email protected]