A day after Comcast beat analysts’ reduced broadband growth expectations, Charter Communications missed some analysts’ consensus targets by nearly 30%, reporting 265,000 broadband additions in Q3.
As a result, Charter stock fell more than 3.5% ($25.14 per share) in pre-market trading Friday, priced at $681.13 each as of 8:07 a.m.
Analysts consensus estimates had Charter adding about 344,000 broadband customers in Q3, mainly because the company failed to preview Q3 net additions like its cable peers Comcast and Altice USA, and according to Wells Fargo Securities media analyst Steven Cahall, investors wondered if Charter would buck the slowdown trend. That, however, was not to be.
In a research note, Cahall, who had estimated Charter would add 300,000 broadband customers in the period, said he believed the Q3 2021 broadband performance was one of the lowest Q3’s in Charter’s history.
“Like [Comcast], we expect [Charter] to call out a tougher selling environment with fewer gross add opportunities,” Cahall wrote, referring to the company’s quarterly conference call with analysts, slated for 8:30 a.m. today.
Charter’s Q3 broadband performance also fell far short (31%) of the Q3 2019 mark of 351,000 broadband additions. The miss appears to have come as a surprise to analysts, who had expected Charter to add about the same or even a little better than Q3 2019, with Barclays Group media analyst Kannan Venkateshwar estimating the company would add as many as 380,000 broadband connections in the quarter. Evercore ISI Group media analyst Vijay Jayant predicted 325,000 broadband adds for the company.
In a press release, Charter said the slower broadband growth was “a function of fewer selling opportunities partly offset by lower churn in the third quarter of 2021.”
Charter added about 244,000 wireless customers in the period, slower than the 363,000 additions in Q3 2020 and the 276,000 adds in Q3 2019.
Charter’s miss comes after Comcast said it added 300,000 broadband customers in Q3, in-line with most analysts' expectations.
Analysts have been expecting a slowdown in the number of cable broadband subscribers after a record 2020, fueled by stay-at-home orders due to the pandemic that forced most Americans to work, play and school from home. Charter was one of the biggest recipients of that windfall, adding more than 2 million broadband subscribers in 2020. Most cable operators have asked analysts and investors instead to compare this year to 2019, when gauging broadband growth.
Comcast has also urged a comparison to 2019, but some analysts saw that as a hint that Q4 could be worse than Q3 in terms of broadband growth.
While Charter’s broadband numbers did disappoint, the company said total revenue was up 9.2% to $13.1 billion and adjusted EBITDA increased 13.9% to $5.3 billion.
In a press release, Charter chairman and CEO Tom Rutledge focused on the 1 million additional customer relationships over the past 12 months and the value of its connectivity products.
“The value of our connectivity products allowed us to add over 1 million customer relationships over the last year,” Rutledge said in the statement. ”Looking forward, we remain focused on improving both the quality and value of our products as demand for more advanced services grows. As data usage both inside and outside the home continues to increase, so do our network and product capabilities. We remain confident in our ability to grow customers, EBITDA and free cash flow for many years to come.“
