Eagle Capital Management, LLC on Charter Communications, Inc.
Thesis
Eagle views Charter as a cheaply valued option on improvement in the cable industry's economics and future consolidation. The Cox acquisition will make Charter the largest U.S. cable operator, while free cash flow yield is expected to exceed 30% within a couple of years. That cash generation should provide capacity to reduce leverage and return capital, while Eagle sees potential strategic value to Comcast, a telecom company or another acquirer.
“We see Charter equity as a cheaply priced option.”
Key risks
- Cable continues to face heavy competitive pressure and minimal growth.
- Approximately 80% of Charter's capital structure consists of debt.