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Comcast Stock: How Much Upside Is Left?

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On August 26, Comcast (CMCSA) stock closed at $43.35, a fall of 2.8% since it announced its second-quarter earnings results on July 25.

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Comcast’s stock performance

Currently, Comcast stock is trading at a discount of 4.3% to its 52-week high of $45.30. The stock is trading at a premium of 32.9% to its 52-week low of $32.61.

Comcast stock has delivered a strong return this year. The company has returned 27.3% year-to-date. Comcast stock has risen 31.1% in the last three years and 55.7% in the past five years. The company’s market cap is $197.0 billion.

Analysts’ recommendations on Comcast stock

Overall, analysts favor “buy” ratings on Comcast. Among the 34 analysts that cover Comcast, 82.35% give it a “buy” rating, while 17.65% give it a “hold.” No analysts recommend a “sell” rating. Currently, analysts have a 12-month target price of $49.28 on CMCSA. On August 26, the company was trading at a discount of 13.7% to analysts’ 12-month target price. The stock’s median target price was $50.00 as of the same date.

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Comcast’s attractive valuation

Comcast stock is trading at 14.1x its 2019 estimated EPS of $3.07 and at 12.7x its 2020 estimated EPS of $3.40. Both of the estimates look attractive based on the company’s projected EPS growth rates of 20.4% for 2019 and 10.7% for 2020.

Comcast stock’s technical levels

Based on its closing price on August 26, Comcast stock was trading 0.9% above its 20-day moving average of $42.96, 0.02% below its 50-day moving average of $43.36, and 1.4% above its 100-day moving average of $42.76. On the upside, the company’s immediate key resistance lies near $43.72, while $42.76 could act as an immediate key support level on a daily basis.

Comcast’s 14-day relative strength index score is 51, which suggests investors are neutral on the stock.

In the trading session on August 26, Comcast stock closed near its Bollinger Band midrange level of $42.96. The value indicates that the stock isn’t oversold or overbought.

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Financial performance

In the second quarter, Comcast’s adjusted EPS of $0.78 not only surpassed analysts’ estimate of $0.75 by 4% but were also 20% higher than its earnings of $0.65 in the second quarter of 2018. The company has surpassed earnings estimates for the past 14 quarters.

Comcast posted revenue of $26.86 billion in the second quarter of 2019, missing the consensus estimate of $27.06 billion by 0.7%. However, its top line grew 23.6% YoY (year-over-year) driven by growth in its Cable Communications segment offset by a decline in its Sky and NBCUniversal businesses.

In the second quarter, the Cable Communications segment’s revenue rose 3.9% YoY on the back of growth in high-speed Internet, wireless, business services, and other revenue. However, voice and video revenue declined in the second quarter due to a decline in its number of residential customers. Advertising revenue also declined YoY in the quarter. NBCUniversal’s and Sky’s revenues fell 0.8% and 3.3% YoY, respectively, in the second quarter.

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Comcast is losing residential video subscribers

Comcast lost 209,000 residential video subscribers in the second quarter compared to 136,000 losses in the second quarter of 2018. Cable operators such as Comcast are struggling to grow their pay-TV customer numbers due to competition from OTT (over-the-top) offerings at competitive prices. Amazon Prime, Netflix, and YouTube TV are the leading providers of OTT offerings. Cable rival Charter Communications (CHTR) lost 150,000 residential video customers in the second quarter. AT&T (T) also lost 778,000 traditional pay-TV customers in the second quarter, which was more than its loss of 544,000 in the first quarter.

High-speed Internet subscribers

Amid pay-TV customer losses, Comcast’s Cable segment is gaining from its high-speed Internet business. In the second quarter, its high-speed Internet revenue increased 9.4% YoY to $4.7 billion. In the quarter, Comcast added 182,000 residential high-speed Internet net customers. Its residential high-speed Internet net customer additions fell YoY from 226,000 and sequentially from 352,000. Charter added 221,000 net residential Internet customers in the quarter.

Dividends

Comcast exited the second quarter of 2019 with free cash flows of $4.2 billion compared to $4.3 billion in the second quarter of 2018 and $4.6 billion in the first quarter of 2019. The company has been using its steady free cash flows to reward shareholders. In the second quarter, Comcast paid $954 million in dividends but didn’t buy back any shares. At the end of August 26, Comcast’s dividend yield stood at 1.94%.

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