Will This Downgrade Hurt Charter Communications (CHTR) Stock Today?

NEW YORK (TheStreet) -- Charter Communications Inc. (CHTR) was downgraded to "hold" from "buy" at Jefferies Group (JEF) on Thursday morning.

The firm lowered its rating on the U.S. cable services provider as it believes the length of a regulatory review will delay benefits from deals with Comcast (CMCSA) and Time Warner Cable (TWC).

Must Read: Warren Buffett's 25 Favorite Stocks

Separately, TheStreet Ratings team rates CHARTER COMMUNICATIONS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHARTER COMMUNICATIONS INC (CHTR) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CHTR's revenue growth has slightly outpaced the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 14.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.94% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for CHARTER COMMUNICATIONS INC is currently lower than what is desirable, coming in at 34.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.68% is significantly below that of the industry average.
  • The debt-to-equity ratio is very high at 110.94 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.15, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: CHTR Ratings Report
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