Operator beats estimates, but sluggish subscriber growth and fears over cord cutting drive stock down 10%

Charter Communications shares plunged more than 10% ($32.06 each) in early trading Friday after it reported mixed earnings, with subscriber growth below estimates even while it beat analysts' predictions for revenue and cash flow growth in the first quarter.

Charter stock was priced at $266.09 in early morning trading, down 10.75%. The plunge was part of an overall decline in the stock over the past several months. MoffettNathanson principal and senior analys Craig Moffett noted in a research note that the stock is down about 20% since Feb. 2.

Charter lost about 122,000 residential video subscribers in the period, compared to a loss of 100,000 in the same period last year. And the cable operator added about 331,000 residential broadband customers, less than the 428,000 it added a year ago.

Charter managed to grow revenue at a 4.9% clip to $10.7 billion and cash flow rose 6.5% to $3.9 billion, all ahead of analysts’ consensus expectations of 4.6% and 6.2% growth, respectively.

“Our integration remains on track, and we continue to drive higher penetration of our Spectrum products and fully deploy our operating strategy across the company,” Charter chairman and CEO Tom Rutledge said in a statement. “When our integration is completed, we will have created a unified infrastructure company, with one service and operating approach, offering customers fast, reliable bandwidth-rich connectivity products.”

In a note to clients, Evercore ISI media analyst Vijay Jayant said wrote that despite the financial gains, investors are becoming more concerned with sluggish subscriber metrics.

“While accelerating revenue growth is encouraging, we believe investors have been focused on subscriber performance as part of a narrative in which the company is focused on share rather than revenue maximization,” Jayant wrote. “These lighter subscriber results could be interpreted as an indication that the competitive landscape has changed, requiring a shift in the company’s strategy.

More to come