Charter Communications Inc. shares have experienced a rally for two consecutive sessions as the company has displayed stronger growth in internet and wireless subscribers than its peer Comcast Corp.
In its first quarter, Charter netted an increase of 76,000 internet customers, with gains of 67,000 in the residential category and a boost of 9,000 customers among small- and medium-sized businesses. In comparison, Comcast reported an increase of 59,000 broadband subscribers in its earnings report, though the company lost 78,000 video customers, marking a slightly smaller drop than the previous year.
Charter’s video losses include 156,000 residential customers and 14,000 business customers. While Wall Street anticipated a decline in video customers, some experts had expected video losses to be more severe.
Comcast’s broadband performance was viewed as “solid” in a note issued by Raymond James analysts. However, Charter’s gains came as a “pleasant surprise”, according to Bernstein analysts Peter Supino and Matthew Heidl. This indicates that the cable industry is well-equipped to deliver on robust internet projections, despite a dip in traditional video.
Bernstein experts suggest that Charter’s performance in the residential video category, compared to competitors like Comcast, may be attributed to the company’s more aggressive pricing strategy. Furthermore, Charter has introduced a “standard rate TV promos”, which may be encouraging existing customers to stay with the provider rather than look for alternative options.
Supino and Heidl have described several factors in advance of Charter’s upbeat results for the quarter. With pressures from a lack of low-end pricing packages, price resets among customers that were absorbed by Time Warner Cable in 2016, and an introduction of a cheaper video option in Charter’s Spectrum TV platform, experts anticipated a rise in video subscriber losses. The broadband results represent a positive move for Charter, however.
Data from Third Bridge Group Ltd.’s Allan Coviello indicates that Charter is operating in regions that comprise about 40% of Comcast’s Comcast Business customer base. Charter’s strength in this quarter offers the cable provider a solid growth opportunity.
Comcast and Charter have both seen a slowdown in net broadband additions from last year. Charter’s year-on-year change dropped from 332,000 to 76,000, a metric in line with last year’s drop for Comcast from 397,000 to 93,000. Coviello cautions that post-pandemic residential demand may wane, as trends suggest customers have signed on to work and study from home.
Still, these recent results display a stronger outlook than predictions for both providers in residential broadband, with Raymond James analysts boosting their outlook for next quarter. Charter is anticipated to lose 15,000 residential video subscribers in the second quarter, while Comcast is predicted to see a decline of 36,000.
With Charter’s outperformance of Comcast, some experts believe this success may be attributed to factors such as increased home spending as Americans continue to stay home during the pandemic. Additionally, there is a renewed focus on acquisitions, renovations, and cable setup for new homes.
Charter’s stock has jumped 9.7% so far this year, while Comcast shares have rallied 5.5%. The S&P Index has increased by 11% in 2021.
Looking forward, while cable companies have the potential for continued growth, there may be pressure on these providers to maintain competitive advantage in their Pricing. Companies like Comcast and Charter offering video and broadband services will need to adapt and navigate the changing needs of the market and the increased expectations of consumers.
