Comcast, Charter slip as Atlantic Equities downgrades, citing weak broadband results
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Comcast (NASDAQ:CMCSA) and Charter Communications (NASDAQ:CHTR) fell on Monday as investment firm Atlantic Equities downgraded the stocks of both cable companies, noting "much worse than expected" results from their broadband divisions.
Analyst Hamilton Faber moved the ratings on both Comcast (CMCSA) and Charter Communications (CHTR) to neutral and cut the price targets to $44 and $477 from $60 and $755, noting that there will be a "a pressure on gross [additions]," while noting that fixed wireless access "will remain competitive for at least two years." There are also concerns that some subscribers that moved to wired broadband during the pandemic will go back to just using their mobile devices. 
"In the absence of robust broadband volumes, we believe valuations will remain pressured and there will be a lack of catalysts to spark investor interest," Faber wrote in a note to clients.
Comcast (CMCSA) shares fell 1% in premarket trading to $39.55, while Charter (CHTR) declined more than 1.5% to $470.
In its most recent quarter, Comcast (CMCSA) had its first-ever period without adding broadband customers on a net basis, as it lost a net of 10,000 residential subscribers and added a net 10,000 new business customers. 
Charter (CHTR) also saw its own drop in broadband subscribers, spurred by the exit of some customers under subsidy.
In conjunction with the downgrades, Faber cut estimates for both Comcast (CMCSA) and Charter (CHTR), as he now expects Comcast (CMCSA) to add just 296,000 net broadband subscribers this year and just 13,000 in 2023, before it rebounds to 338,000 in 2024.
He also expects Charter (CHTR) to add 225,000 broadband subscribers this year, just 57,000 in 2023 and 455,000 in 2024.
The analyst also cut his 2025 EBITDA estimates on Comcast (CMCSA) by 9% and 4% for Charter (CHTR).
In addition, the analyst noted that while lower move churn is half the pressure on gross adds, fixed wireless access competition, notably from T-Mobile (TMUS) and to some extent, Verizon (VZ), is having an impact. 
"Using top-top down estimates for T-Mobile and Verizon based on the companies' own FWA targets (which are actually looking increasingly conservative), we estimate FWA could add 2m subs per year, eating up a lot of the market growth of 2-3m additions," Faber explained, adding that it could be at least until 2024 when cable companies upgrade their networks and they start to add subscribers again. 
Analysts are mostly positive on Comcast (CMCSA). It had an average rating of BUY from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CMCSA a HOLD.