Charter: 57% below base value, and still not in the buy zone

Charter now has a market value of $17.0 billion sitting on top of $117.7 billion of debt, leases and preferred claims. My Base case expects the company to generate $5.55 billion of cash for the common in 2026, rising to $7.58 billion in 2028, after interest, taxes, integration costs and stock pay. At today's price the market value is about 3.1 times the 2026 figure and 2.2 times the 2028 figure.

At the October 9, 2026 close of $103.38, the shares trade 56.8% below my triangulated Base value of $239, an upside of 131.3%. The Bear value is $66 and the Bull value is $462. That reads like an easy buy, and it is not, for three reasons. The equity is a thin slice of the enterprise, so small errors in EBITDA or debt move the value a long way. The two valuation methods land 57% apart. And broadband customers are still leaving. The required margin of safety (MOS), the discount to fair value I need before buying, is 60%, so the maximum buy price is $95.65. The shares are 8.1% above that, so they would need to fall 7.5% to reach it.

Valuation route: standard value for a leveraged cable and broadband operator, with the leveraged-company override. Economic classification: Standard Company, 3/12 on the sector scorecard, so the standard method applies. Primary method: normalized owner free cash flow times a multiple. Secondary method: EV/EBITDA less all claims. Cross-check: a five-year DCF at 11%. Values are present fair-value estimates, not 12-month price targets. Owner free cash flow here means cash left after capex, interest, normalized cash taxes, integration cash and stock pay.

What Charter is

Charter sells broadband internet, video, mobile phone service and business connectivity under the Spectrum brand. In 2026 it closed two deals that changed its structure: the all-stock acquisition of Liberty Broadband and the purchase of Cox Communications. The result is a larger operator with a more complicated capital structure.

• The listed company owns Class A shares of Charter Holdings. Advance/Newhouse holds exchangeable units, and Cox's former owners hold common units and $6.0 billion of convertible preferred units paying 6.875%.
• The preferred converts at $477.41 a share, far above today's price, so I treat it as a $6.0 billion claim ahead of the common, not as shares.
• Per-unit values below divide by all common-equivalent units, 164.64 million, so the price is comparable with what each economic owner holds.

The latest quarter

No full reporting period for the combined company exists yet. The table shows Charter's last standalone quarter before the closings. The third quarter report is due on November 6, 2026.

The pattern is the one Charter has shown for two years. Internet customers leave, internet revenue shrinks, and mobile lines grow quickly. Free cash flow for the first half was $2.3 billion, below the $2.6 billion of a year earlier.

Why owner free cash flow, and not EBITDA, is the number that matters

Charter's adjusted EBITDA is large, about $27 billion for 2026E in my Base case with Cox. Capex of $13.6 billion, cash interest of $6.0 billion, taxes, integration cash and stock pay take most of it before anything reaches the common. In 2026E my Base owner free cash flow is $5.55 billion, a fifth of EBITDA. The path below shows why the value depends so heavily on capex coming down: capex falls from $13.55 billion to $10.1 billion by 2028E while EBITDA slips from $27.35 billion to $26.55 billion.

Charter guided standalone capex to $7.5 to $8.0 billion in 2028 to 2029, and my Base uses $8.3 billion and $8.0 billion for the standalone part. If capex does not fall, the whole Base value is wrong, which is why it is the first thesis breaker below. I deduct stock-based compensation of about $0.75 to $0.79 billion a year, and I do not assume buybacks, because Charter paused repurchases through the third quarter.

Debt, preferred stock and units

The unit counts, the Cox debt and finance leases, the Liberty Broadband net debt, and the other closing-date adjustments are my estimates from the disclosed transaction terms and the June 30 balance sheet. They are marked ESTIMATED because a full post-close balance sheet is not yet available. Net debt of $111.5 billion is 4.1x 2026E adjusted EBITDA; with the preferred it is 4.3x. Operating leases are left out of net debt, because the rent is already deducted in EBITDA. Finance leases are in.

Primary valuation: normalized owner free cash flow times a multiple

I value the company at the end of 2027 on 2028E owner free cash flow, discount that value to today at 11%, add the owner cash flow from the fourth quarter of 2026 and 2027, and subtract the preferred. The multiples are 5x in Bear, 7x in Base and 9x in Bull. A mature, shrinking-to-flat cable business with this much debt does not deserve more than 7x in Base, and these multiples are assumptions, not data.

The primary Base value is $290.80.

Sensitivity: value per unit

Secondary valuation: EV/EBITDA less every claim

The second method ignores my cash flow path and asks what the enterprise is worth on 2027E EBITDA after stock pay, then subtracts all claims. I use 4.5x, 5.5x and 6.5x. This method punishes leverage heavily: at 5.5x the enterprise is worth $144.3 billion, and $117.7 billion of that belongs to creditors and preferred holders.

The secondary Base value is $161.65. In Bear the equity is worth less than zero on this method, which I floor at $0 in the triangulation, because a common stock cannot be worth less than nothing.

Sensitivity: value per unit

One turn of EV/EBITDA is worth about $159 a unit. That is what a stock with a thin equity layer looks like.

Cross-check: five-year DCF

The DCF gives $337.94 in Base at 11% and negative 1% terminal growth. It is a cross-check, not an input, because 61% of its value sits in the terminal value and it assumes the owner cash flow arrives as modeled. It points the same way as the primary method and higher than the secondary one.

History and growth diagnostics

Valuation history. Public data sets put Charter's long-run EV/EBITDA around 6.6x. The Cox deal changed the capital structure enough that history is only a loose cross-check here. Today's 4.9x is below the Base multiple and below that history, but Base does not assume a return to 6.6x.

PEG (diagnostic only). Reported earnings per share of $38.43 give a P/E of about 2.7 on a heavily leveraged equity with a changed share count, so a growth multiple built on it is not meaningful. Flag: PEG_NOT_MEANINGFUL. Growth type: ACQUISITION_AFFECTED.

Free cash flow growth quality (diagnostic only). My Base owner free cash flow rises from $5.55 billion in 2026E to $7.58 billion in 2028E, a compound growth of 16.9% a year, or from $33.71 to $46.04 a unit with a constant unit count. That growth does not come from rising profits. EBITDA falls in the same period. It comes from capex dropping by $3.5 billion and from lower integration cost, so the flags are CAPEX_TIMING_DISTORTION and ACQUISITION_AFFECTED. Forward owner cash flow yield on the $17.0 billion market value is 32.6% for 2026E, 38.1% for 2027E and 44.5% for 2028E, which tells you how leveraged the equity is and does not describe a normal yield. Forecast reliability: LOW. Stress test: 2028E owner free cash flow 20% lower gives a primary value of $234, 40% lower gives $177. Neither stress takes the primary value below today's price.

Valuation triangulation

The primary and secondary Base values differ by 57.1% of their midpoint, well above the 30% line where the framework flags VALUATION_DIVERGENCE. The consequences are written into the rules: Confidence drops a grade and is capped at B before other penalties, and the margin of safety rises by 5 to 10 points. I weight the primary method at 60% because it values the cash the common actually receives after interest, and the secondary at 40% because it reads the same business through a multiple that is only an assumption. The weights are a judgment, and the table at the end shows the result at 50/50 and 70/30. The divergence says one thing clearly: the answer depends on whether cash conversion improves as capex falls, and this analysis cannot prove that it will.

What is the market already pricing in?

Reverse valuation: at $103.38 the market value of $17.0 billion plus claims gives an enterprise value of $134.7 billion, or 4.9x 2026E adjusted EBITDA and 5.1x 2027E EBITDA after stock pay. Using the same 7x multiple as my Base, the price is consistent with 2028E owner free cash flow of only $2.57 billion. That is 34% of my Base figure of $7.58 billion. Put the other way, the price equals about 2.4x my Base 2028E owner cash flow. My Base case implies 6.3x 2027E EBITDA, against 4.9x today.

The market therefore expects either a sharp EBITDA decline, capex that stays near today's level, or trouble refinancing. On the primary method alone even my Bear case, with standalone EBITDA falling about 5% a year and capex above $11 billion, is worth $111, above the price. The Bear value of $66 is lower only because the EV/EBITDA method puts Bear equity below zero.

Bear, base and bull scenarios

Bear: the broadband decline accelerates, the Cox business shrinks with it, synergies are small, capex stays high and refinancing costs rise. 2028E owner cash flow is $4.38 billion at 5x. Base: standalone EBITDA falls about 2.5% a year, Cox is roughly stable, synergies reach $0.8 billion and capex follows the guide down. Bull: mobile and convergence hold customers, EBITDA stays flat, synergies reach $1.0 billion and interest falls as debt is repaid. Bear and Bull each get the same discount rate and the same net debt as Base, so each risk is counted once. I assign no scenario probabilities, because the spread itself is the finding.

How the buy price is set

Confidence is D, which starts the margin of safety at 50%. Leverage, structural disruption, terminal value dependence and method divergence would add 30 more points, for 80%. The framework caps the required margin of safety at 60% and says that anything above that should be a no-buy or watchlist case. At 60% the maximum buy price is $239.14 x 40% = $95.65.

The verdict depends on the margin of safety more than on any other input. With a lighter margin the same Base value would put the current price inside the buy zone, and I want you to see that before you decide:

On discount alone, a price 56.8% below Base would be classed as Deep Undervalued, which maps to a strong buy. The framework does not let that stand when the price is above the maximum buy price, when Confidence is D and when leverage is this high. I apply the rule as written and do not soften the margin to fit the price.

Dividend and capital return

Charter does not pay a common dividend. Repurchases were $838 million of shares in the second quarter, are paused through the third quarter and are expected to resume in the fourth. With claims at 4.3x EBITDA, buybacks before leverage falls would work against the deleveraging case. The Cox preferred units pay 6.875% on $6.0 billion, about $0.41 billion a year, which is paid before the common receives anything.

Reasons to own CHTR

• Price against cash. The shares sell at 2.4x my Base 2028E owner cash flow and 4.9x EBITDA.
• Capex is guided down. Management has said capex falls to $7.5 to $8.0 billion by 2028 to 2029, which is the engine of the Base case.
• Mobile growth. 12.5 million lines and 406,000 net additions in the latest quarter support convergence and retention.
• Scale and synergies. Cox adds customers and a cost synergy opportunity that I put at $0.8 billion by 2029 in Base.
• Equity leverage works both ways. If enterprise value holds and debt is repaid, the common gains faster than the business improves.

What could go wrong?

• Structural broadband decline. Internet customers fell by 172,000 and internet revenue fell 3.2% in the latest quarter. Fiber and fixed wireless keep taking share.
• Capex does not fall. Each $1 billion of extra 2028E capex lowers the primary Base value by about $37 a unit at 7x.
• Balance sheet. A $1.5 billion change in net debt moves the triangulated value by roughly $9 to $10 a unit, and refinancing a large stack in a weaker credit market raises interest cost.
• Integration. Cox customer retention and the Spectrum rebrand are unproven, and a full combined quarter has not been reported.
• Finance leadership. Charter announced a chief financial officer transition on August 31, 2026, and Reuters reported that the current CFO would step down on October 15 with an interim CFO named.

Management execution

Management has a record of aggressive buybacks and steady network investment, and it bought Cox at a multiple close to Charter's own. It has not given a leverage target or a post-close free cash flow figure, and the CFO is changing in the middle of the integration. Management credibility scores 9/20.

Stock Analyza scorecard

Business quality is low for a good reason: returns on capital are below the cost of capital at today's capex, the balance sheet is stretched and growth is negative on the core. The moat score reflects dominant local cable networks that are costly to replicate but are losing customers to alternatives.

The valuation score is held down by the 57% disagreement between methods and by thin protection in the Bear case, even though the discount to Base is large.

Confidence score

Confidence is D. Valuation robustness is 1/5 because the methods diverge by 57% and the equity is very sensitive to debt and EBITDA, and dispersion is 1/5 because Bear and Bull are $396 apart. No post-close period has been reported.

What I would watch from here

Next review: the third quarter report on November 6, 2026, which should be the first to include the combined company.

The three most important thesis breakers

1. Capex does not fall toward the $7.5 to $8.0 billion guide, which removes the main source of Base cash flow growth.
2. EBITDA erosion accelerates faster than the 2.5% a year in Base, so the cash flow falls before capex does.
3. Leverage does not decline, or refinancing is done at much higher cost, because $117.7 billion of claims leave very little room for error.

Stress test and independent check

I recomputed every table from the inputs listed above: the owner cash flow path, the three valuation methods, the triangulation, the grids and the net debt sensitivity. The arithmetic reconciles. The strongest counter-thesis is that cable broadband is in permanent decline, that Cox simply adds leveraged legacy assets, and that the apparent cheapness is an artifact of a thin equity layer. That could be right, and it is why Base carries negative EBITDA growth and negative terminal growth, why the preferred is a claim ahead of the common, and why stock pay and integration cash are deducted.

Bias test: the weights between the two methods are my judgment, so here is the result under other choices, and how the value moves if net debt is different from my estimate.

The choices that lean conservative are deducting stock pay, deducting integration cash, flooring Bear at the secondary method, and capping nothing in favor of the stock. The ones that lean generous are a 7x Base multiple on 2028E cash flow, capex following the guide, and net debt that is my own estimate. I did not tune any of them toward a buy verdict. Treat the result as conditional, because the post-close balance sheet is estimated and the methods diverge.

Not available or estimated. Unavailable: a full post-close balance sheet and quarterly results, audited Cox figures, a verified consensus, a peer valuation table. Estimated: unit counts, the Cox and Liberty debt amounts and other closing adjustments, the whole forward path, the multiples, the 11% discount rate and the Q4 2026 cash flow.

Final verdict: hold at $103.38

Charter is cheap on every cash flow measure I can build, and the Bear case alone does not take the common to zero on the primary method. But cheap is not the same as a buy price. With Confidence D, a 57% disagreement between methods and $117.7 billion of claims ahead of the common, the framework asks for a 60% margin of safety, and the stock is 8.1% above the price that gives me.

VERDICT: HOLD (WATCHLIST) at $103.38; Triangulated Base $239; upside 131.3%; required MOS 60%; maximum buy price $95.65. The main thesis breaker is capex that stays near $13 billion while EBITDA keeps shrinking.

Sources

Primary sources are Charter's second quarter 2026 results and its Form 10-Q for the period ended June 30, 2026, the Advance/Newhouse Schedule 13D amendment, and the Cox transaction documents and closing announcements. Share count, market value and company news come from stockanalysis.com, and the price was cross-checked against the XTB quote.

The reference market price is the October 9, 2026 Nasdaq close of $103.38. Balance sheet figures are as of June 30, 2026, before the Cox and Liberty Broadband closings. Post-close units and claims are estimates from disclosed terms. Third quarter results were not yet available. The owner free cash flow path, multiples, discount rate and terminal growth are analytical estimates, not company guidance.