In the past year Charter stock (spectrum internet) has been seriously hammered going from $400 to a current $126. It was even $800 2 years ago. The sell-off was mostly due to fears of increased fiber competition and fixed wireless internet. The business itself has not really done poorly - they are losing internet and video subscribers at a rate of 1-2% a year, but they are growing their mobile subscribers at a rate of 10-15% a year - the end result that total active product numbers are increasing, and revenue, profits, and free cash flow appear to be steady. Additionally, Charter will finish their network upgrades within a couple pf years which should boost free cash flow 50% to around $7-8 billion. Additionally, there may be room to improve net profit as the EBITDA is around $20 billion and depreciation may have increased as they roll out their multi-year network upgrades. They do have around $90 billion in debt - costing them around $5 billion in interest, however that debt is pretty safely covered by $10 billion in EBIT.
Right now Charter trades at around $16 billion - a price to earnings of 3.2. Management is aggressively pursuing buybacks at a rate of around $4 billion a year. At the current price that is a 25% annual buyback - causing a 33% increase in EPS. Run the numbers for 10 years and Charter is a 16 bagger, plus they can retire around $20 billion in debt (partly from increased fcf in a couple years).
If they use all the profit for buybacks ($5 billion) that is a 33% buyback and 50% increase in EPS - a 56 bagger in 10 years (assuming profit & p/e remain stable) - or even more if the p/e ratio goes up (a 20 p/e would be a 350 bagger). This obviously seems unlikely, but the math pans out.
Due to the low p/e the stock doesn’t really seem risky. Even if earnings drop 80% long term - buybacks can still make this a 2-10 bagger.
That is the thesis. Obviously no stock is without risk - it can go bankrupt, earnings can rapidly drop…etc, but it looks like a low-risk/hogh reward play IMO. If the p/e goes above 6 I am planning on selling (hopefully for a 100% gain).