Internet providers have enjoyed impressive stock performances, With larger-than-average dividends, consistency has persisted over their long life spans. However, the impending end of the Affordable Connectivity Program is stressing out Americans who use it to get a discount on their internet bills.
These three internet provider stocks represent some of the worst-performing and overpriced options. So, they’re expected to take the biggest hits from the upcoming affordability crisis. Many people won’t be able to afford subscriptions to internet services providers (ISP) any longer. So, investors can get out ahead of the severe drops.
Let’s detail these three stocks’ unfavorable performances, and how competition, new regulations and governmental actions will wreak havoc on them.
Charter Communications (CHTR)
Long-standing Charter Communications (NASDAQ:CHTR) is a widely recognized name in the internet provider sector. However, Charter Communications has seen an alarming drop in stock price and overall performance in recent years.
So far this year, CHTR saw a steep February plunge, decreasing over 70% from just a few years ago. Many investors are dumping the stock due to its continuing problem of losing customers.
Also, the impact can be seen in Charter Communications’ financials. In its most recent report, it suffered from an earnings miss on quarterly profits. Revenue growth for Q4 2023 was only 0.3%, and the stock price remained unchanged.
One of CHTR’s biggest challenges, causing its subscriber loss, is the highly competitive market in which it operates. Charter Communications has competitive pricing but a comparatively high operating cost. With the already declining performance, we can only imagine CHTR’s financials when millions of Americans can no longer afford the internet.
Comcast (CMCSA)
Giant Comcast (NASDAQ:CMCSA) has the most significant market share. Compared to the others on this list, Comcast hasn’t performed horrendously over its lifetime. However, recent news makes a short-term drop for Comcast seem increasingly inevitable.
First, the new regulation passed by the Federal Communications Commission (FCC) requires internet providers to be highly transparent with their “all-in” pricing. This rule gives customers a clearer idea of pricing from different providers to compare and avoid hidden fees.
Passed last month, this new rule worries many Comcast investors. The provider has a history of having a lower “on-page” fee but has a reputation for charging many hidden costs. Given that information, Comcast will now be required to plainly state these fees in their on-page pricing. And this may indeed turn away many customers.
As mentioned earlier, the Affordable Connectivity Program is ending to amplify this effect. Following the FCC rule, Comcast was already going to have to lower costs to remain competitive. Still, the end of this program will undoubtedly enhance the incoming customer decline.
Viasat (VSAT)
Global internet provider Viasat (NASDAQ:VSAT) uses an extensive satellite network to provide customers with high-speed internet. Despite grand ambitions, VSAT has been steadily declining over the last five years, hitting an all-time low this year.
Further, a factor contributing most to Viasat’s poor performance this year is the enormous financial hit the company suffered last year. In July 2023, Viasat announced that its ViaSat-3 Americas satellite was experiencing an anomaly that would affect its performance. But what they meant is that it did not function at all.
While Viasat’s existing satellites weren’t affected, the loss of this satellite totaled around $750 million. And, the revenue it hoped for created another immeasurable loss. In Q1 of fiscal year 2024, Viasat reported an increased net loss of $77 million.
Thus, these financials show Viasat has continued its high spending habits with seemingly fewer sustainable revenue sources. Add the incoming affordability crisis, and Viasat will almost certainly struggle to produce returns this year.
On the date of publication, Joel Lim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
