Analyst Note| Michael Hodel, CFA |
Charter Communications' customer growth was in line with our expectations during the second quarter, but revenue per customer is tracking higher than our forecast. Profitability was also stronger than anticipated. Management continues to believe that customer growth will accelerate in the coming quarters, causing marketing, installation, and customer service costs to increase, pressuring margins. Even with that consideration, our margin expectations have been a bit too low. With increased pricing and margin assumptions, our fair value estimate increases to $600 per share from $565. Despite the increase, we believe the shares remain modestly overvalued.