Charter Communications doesn’t make any sense
Whenever I mention Charter Communications, the majority of the responses I get from people within earshot is “I hate Charter!” I don’t blame them. Charter Communications is available in this area and are notorious for their service interruptions and lack of customer service.
When they filed bankruptcy in 2009, it came as no surprise to most. Paul Allen and his lack of leadership almost guaranteed Charter’s failure.
The bankruptcy ended in November, 2010, and shortly after the stock started to rise again. In fact, it hit an all-time high just this past week! The question is, why?
Charter’s old stock holders were wiped out during the bankruptcy, so investors were heavily burned. Why are they suddenly enamored to get Charter stock once again?
They finally stripped all of Paul Allen’s influence in the company this past January, which is a good thing. They also inked a deal to use TiVo hardware. This is also a good thing, considering TiVo will probably end up suing every other company under the sun that uses a DVR.
Is that enough to go from a low of $31.16 a share to $61.15 this past week?
- Their ROE is effectively zero because they have no net profit
- They have no P/E ratio because they have no earnings
- They have a negative earnings per share (EPS)
- They are still very highly leveraged
Conventional investing wisdom would say this is not a good investment at all. So why does their stock keep going up?
I certainly can’t tell why. Analysts just say that Charter is doing well, but they don’t say why.
Is it all just hype?