Citigroup cable and satellite analyst Jason Bazinet lowered his rating on Charter Communications Inc. to “hold” from “buy” last week, mainly because the recent rise in stock has pushed shares nearer to his $1.75 12-month price target, eliminating much of the upside potential.
Charter stock has risen 26% (about 30 cents) since July for three reasons, Bazinet wrote in a research report: Strong operating results and positive investor sentiment has boosted the entire sector; Charter’s exchange offer for $850 million in notes was a positive move for shareholders; and a $450 million convertible note-exchange offer that forced some noteholders who had hedged their investments by shorting the stock to unwind those short positions, which has created some upward pressure on the stock.
Charter stock closed at $1.49 on Sept. 14, up 31 cents from the July 3 close of $1.18.
Bazinet wrote that he still believes that Charter is on track for a turnaround, praising Charter management for its long-term strategic plan and moves to alter the capital structure to give it more time to focus on operations.
Bazinet also is optimistic that rollout of phone service — which has just begun for Charter — will help top line and bottom-line growth.
“We think these points remain valid today,” Bazinet wrote. “Our downgrade is solely based on the strong run-up in the stock.”
