Charter Communications Isn't A Buy ... Yet.

Hey everyone! Here's hoping your trading has been going well recently.

Today, we're taking a look at Charter Communications, CHTR which has to hold the title for one of the most beaten down stocks over the last couple years. Dropping from all-time highs near $800 per share, a recent downswing in FCF has caused shares to plummet, and increased questions about the company's large ~$100 billion debt pile.

Despite the concerns on the part of legacy investors, we like the company over the long term. The debt is high and some of the legacy businesses are in slow, secular, profitable decline, but new growth in the wireless and connectivity businesses should prove to offset this. In addition, the company has been very active in buying back it's stock, which is extremely positive from a supply standpoint.

Analysts remain confident about CHTR's earning power into the future, and the company's infrastructure should enable high FCF generation, which means that there could be serious gains to be had.

That said, it's not the right time to buy shares just yet, in our view.

Recently, an earnings miss sent the stock plummeting below yearly lows, and into deeply oversold territory:


Due to this, it's not clear if / when the stock will rebound.

We'll be watching momentum in the stock to turn around. Once it does, then it's time to jump into this stock guns blazing, assuming nothing changes from a fundamental standpoint. Specifically, we'll be looking for consecutive green candles before jumping in:


Selling puts on this stock is also an intriguing idea, potentially a couple months out with a strike price near $250 - if you're a yield trader.

TLDR: CHTR looks like a solid long term buy, but should be avoided until momentum turns around and investors are once again ready to back the stock.

Stay safe out there!

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