We recently published a list of 10 Worst 5G Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Charter Communications, Inc. (NASDAQ:CHTR) stands against other worst 5G stocks to buy according to short sellers.
As we move a quarter of the way into the 21st century, the world is paving the way for new technologies to make human lives easier and more advanced. Out of those, 5G and artificial intelligence (AI) are two of the century’s most important innovations.
We discussed the correlation between the two of them in our article about the best 5g stocks to buy according to short sellers. Here is an excerpt from the article:
“In a CNBC interview at the Mobile World Congress Shanghai on June 26, director-general of the GSM Association, Mats Granryd highlighted the deep connection between 5G and AI and suggested that their mutual rise is not accidental. He said that “AI feeds off 5G and 5G feeds off AI.” This is especially evident in China, where the development of standalone 5G networks is well advanced and discussions are already shifting toward 5G Advanced (5.5G). While some countries lag, like the Philippines, Mats pointed out that this dynamic between 5G and AI is most prominent in regions with widespread 5G coverage…
…Mats believes that 5G will follow a similar path to become a common platform worldwide, which will also extend to AI. While some regions may advance faster than others initially, he showed confidence in the fact that everyone will eventually catch up and benefit from the integration of AI with 5G.”
The Outlook For 5G Industry
We also previously discussed the Market Research Future report which expects the 5G market to reach $229.41 billion by 2032, growing at a compound annual growth rate (CAGR) of 40.60% between 2024 and 2032.
According to a 5G Americas report, the wireless telecommunications sector continued to expand in the first quarter of 2024, driven by the widespread growth of 5G technology. Global 5G connections reached nearly two billion. North America’s leading adoption accounted for 32% of all 5G connections and added 22 million new connections, totaling 220 million. Latin America also experienced growth, with 8 million new LTE connections and 9 million 5G connections.
For the future, the 5G Americas forecast suggests that global 5G connections will reach 7.7 billion by 2028, with North America projected to have 700 million. The Internet of Things (IoT) is expected to further drive 5G adoption, with global IoT subscriptions expected to grow from 3.3 billion to 5 billion by 2028.
The Evolution of Mobile Networks with 5G Advanced and 6G
According to a March report by CNBC, telecom executives discussed plans for 5.5G or 5G Advanced at the Mobile World Congress in Barcelona, even as 5G is still being rolled out. The new stage of mobile technology is expected to enable advanced applications like mixed reality headsets, autonomous vehicles, and smart factories, which were initially promised with 5G.
The 5.5G technology will improve network capabilities by increasing data speeds and enhancing connectivity. It will also use AI to optimize networks and reduce power consumption. Huawei expects that 5.5G will begin commercial deployments by 2024, with the potential for much faster download speeds. The focus now is on improving 5G’s commercial relevance and paving the way for 6G in the future.
Moreover, a team of scientists, led by Professor Withawat Withayachumnankul from the University of Adelaide, has created a new polarisation multiplexer that could greatly improve 6G communications. The device works at terahertz frequencies, which are much faster than current wireless systems. It can send multiple data streams at the same time over the same frequency, effectively doubling the data capacity.
The multiplexer is built on a silicon base and has been successfully tested and reduces data loss compared to existing technology. The innovation could lead to faster, more reliable wireless networks and would benefit areas like telecommunications, video streaming, and future 6G mobile networks. The team expects it to drive more research and become available in commercial products within the next decade.
Our Methodology
To select the 10 worst 5G stocks according to short sellers, we used ETFs and screeners to identify over 40 stocks that have significant involvement in the 5G industry. Next, we narrowed our list to 10 stocks with the highest short interest. Finally, these stocks were ranked in ascending order of their short interest.
We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A line of cable boxes and modern televisions, representing the company’s video services.
Charter Communications, Inc. (NASDAQ:CHTR)
Short Interest as % of Shares Outstanding: 8.41%
Number of Hedge Fund Holders: 48
Charter Communications, Inc. (NASDAQ:CHTR) functions as a major provider of broadband and cable services for both residential and business clients across the US. As a known company in the 5G sector, its Spectrum Mobile service plays a key role in its efforts to improve connectivity solutions.
The company provides a range of subscription-based services including internet, video, mobile, and voice options. The offerings include a comprehensive suite of broadband connectivity, in-home WiFi, voice communication services, and other broadband solutions.
In June 2023, it chose Nokia to assist with 5G connectivity for Spectrum Mobile users, which represented a significant advancement in its 5G rollout plans. The investment in 5G technology aligns with a wider trend among cable operators to deploy Citizens Broadband Radio Service (CBRS) spectrum. The CBRS spectrum allows the company to develop 5G networks that can ease up traffic from their rented mobile networks, which improves the service experience for their mobile subscribers.
Charter Communications (NASDAQ:CHTR) has recently navigated a challenging financial landscape, which is reflected in a dip in its stock performance. For the first quarter, the company reported a stagnant revenue at $13.7 billion and a modest 8% rise in net income to $1.1 billion. Although net income saw growth, the figures fell short of what analysts had anticipated, which impacted investor sentiment.
In the second quarter, the company experienced a decline in its total internet customer base, dropping by 149,000 to 30.4 million. Despite this downturn, the company’s revenue was $13.7 billion, which surpassed the forecasted $13.6 billion. It tops our list of the worst 5G stocks to buy according to short sellers.
On a positive note, the company’s mobile sector grew by 557,000 lines, reaching a total of 8.8 million. Its EBITDA rose by 2.6% to $5.7 billion. Additionally, EPS climbed from $8.05 to $8.49, which beat the anticipated $7.98, partly due to share buybacks. CEO Chris Winfrey highlighted ongoing efforts to enhance operational efficiencies and service capabilities, which have contributed to improved EBITDA.
Analysts remain cautious about the company’s future. On September 10, Citi upgraded Charter Communications (NASDAQ:CHTR) to Neutral from Sell with a $350 price target. The upgrade is owed to a reassessment of the company’s valuation and a more stable broadband operating environment for the third quarter. The improvement in the Affordable Connectivity Program (ACP) retention also indicates better-than-expected results in this area, as per the firm.
Nonetheless, the firm still leans towards large-cap telecom stocks over cable stocks, though telecom valuations are beginning to acknowledge stronger fundamentals in wireless sectors.
Adding to the company’s prospects, it recently announced a significant partnership with Warner Bros. Discovery. The agreement will include the premium Max (Ad Lite) service, including all HBO and Max content as well as Discovery+, within Spectrum TV Select packages at no additional cost. The new deal represents a major shift for the company and places it as a more competitive player in the evolving media landscape.
In Q2, 48 hedge funds had investments in Charter Communications (NASDAQ:CHTR), with positions worth $4.49 billion. Harris Associates is the top investor in the company as of the second quarter and has a stake of nearly $1.9 billion, as of the second quarter.
Parnassus Investments stated the following regarding Charter Communications, Inc. (NASDAQ:CHTR) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE and Charter Communications, Inc. (NASDAQ:CHTR). NICE is a leading cloud contact center software company. Charter’s stock had fallen due to near-term concerns, which we believe will not have a major impact on the long-term value of the business. Charter Communications has had several issues that created short-term uncertainty. We assessed that these issues have limited impacts on the long-term value of the business and initiated a position to take advantage of the stock’s historically low valuation.”
Overall, CHTR ranks 1st on our list of 10 worst 5G stocks to buy according to short sellers. While we acknowledge the potential of CHTR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CHTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.