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Shares of Charter Communications tick up after bullish Morgan Stanley call

Charter Communications' trucks are seen at their Newtown, Connecticut.
Yvonne Hemsey | Getty Images

Shares of Charter Communications rose slightly Tuesday morning after Morgan Stanley reiterated its "overweight" rating on the company.

The stock later reversed and ended the day slightly lower.

Analysts at Morgan Stanley Research kept their $265 price target for the stock, which traded near $226 on Tuesday morning. Shares rose about 1 percent. Morgan Stanley analysts cited Charter's Time Warner Cable and Bright House acquisitions, financial leverage, tax position, and buyback capacity for the bullish case.

"Charter shares offer investors a rare levered equity growth story," the note said. "We expect Charter to successfully implement the strategy it has proven out over the last four years on this now larger footprint, driving meaningful growth."

Assuming the company cannot find "compelling investment opportunities elsewhere," Charter will buy back 35 to 40 percent of its roughly $70 billion market capitalization by the end of 2019, analysts also said. The company does carry $60 billion of debt, but analysts said given the current interest rate environment, the leverage is "not only appropriate but close to optimal for equity holders."

They did point out risks to Charter's leverage, which leaves it heavily exposed to interest rate levels over time.

"This is currently a positive but creates additional equity value volatility," the note said. "Elevated leverage also means significant movement in the stock price on relatively small changes to the EBITDA multiple."

The stock is up more than 16 percent since last June, and nearly 10 percent year to date.