Pure play with competitive pricing strategy

The cable group remains out of favour as investors fret over broadband maturity while Comcast pressures sector valuations with aggressive M&A activity. However, we believe that Charter, as the largest cable pure play and with a very sensible pricing strategy, is well positioned to compete and can deliver high single digit EBITDA growth over the next four years, even with the current competitive backdrop. The current valuation is very attractive and Charter's 2020 FCF multiple sits just one to two turns above the fully mature telcos. Looking ahead, Q2 should show an improvement from Q1's surprise billing integration issue while Q3 should be clean. We are lowering our PT from $385 to $365 as we lower our target FCF multiple but remain Overweight and view the current price as a good entry point.