esterday, Charter Communications ($CHTR) got hit with an astronomical punitive fine after one of their repairmen murdered a customer whose home he was servicing in 2019. A brutal blow one day ahead of earnings.

Charter Communications to Pay $7 Billion for Murder

The defendant in the murder trial, former Charter employee Roy James Holden, was sentenced to life. Holden had lied about his past jobs and Charter hadn’t verified his employment history. Had the company done so and discovered the lie, he would have been disqualified from being hired. Records also show that Holden racked up disciplinary actions and took pictures of driver’s licenses and credit cards at the homes of two elderly female customers.

Charter tried to force the family into arbitration by submitting documents to the court that showed the family had agreed to the company’s terms of service, which included an arbitration agreement, by checking a small box when they paid online, and signing a scanned document. As it turns out, the documents and signature were fake.

Charter Communications Quarterly Cash-on-Hand Source: Macrotrends

These fake documents and Charter's failure to verify the defendants employment history were at the core of the punitive damages. The jury awarded the family $357mm in compensatory damages, and another $7bn for Charter's negligence. Charter's lawyers plan on appealing the case, but whether or not a judge looks favorably on a giant corporation that forged documents in court is up for debate.

At present, Charter has $2.4bn cash-on-hand, meaning it cannot cover the damages in a lump-sum payment. If successfully appealed, the punitive damages may be lowered to an amount that is more likely to get paid. It will not be a slap on the wrist.

YTD Performance CHTR vs. CMCSA vs. RCI Source: MarketBeat

Investors will begin questioning whether or not Charter has a hidden history of falsifying documents and hiring without background verification or taking disciplinary action when required. There is no doubt $CHTR will sell-off further as a result.

So what will investors buy instead? Our analysis identified two alternatives. Comcast Corp ($CMCSA) and Rogers Communications ($RCI). Comcast trades at a reasonable 13.5x P/E relative to Charter's 17.4x P/E. Analysts assign a "moderate buy" rating to Comcast, with a projected 42.5% upside at a $56 price target. Short interest is healthy, at 1.5% of float, and earnings are projected to grow by almost 14% annually.

Rogers Communications currently trades aat an 18.3x P/E, but has a forward P/E of 15.85x, implying the stock will grow steadily into its valuation. Analysts also assign $RCI a "moderate buy" rating, with a projected 70% upside at a $78 price target. Short interest is healthy, at 1.5% of float, and earnings are projected to grow by almost 18% annually.

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Only Degenerates, Tendies, and its analysts have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Jul 29, 2022
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