uploads/2019/10/Comcast-3.jpeg

Analysts Raise Comcast’s Price Target after Q3 Results

By

Updated

Comcast (CMCSA) reported its third-quarter results before the markets opened on Thursday. The company’s adjusted EPS rose 21.5% year-over-year to $0.79 in the quarter, beating analysts’ average estimate of $0.75. Comcast’s revenue rose 21.2% YoY to $26.83 billion, exceeding analysts’ estimate of $26.77 billion.

During the company’s earnings call, Comcast CEO Brian Roberts noted, “From my perspective, 4 things stood out as we wrapped up the quarter: our incredible strength in broadband; the enduring popularity of our premium content; our strong global footing just 1 year after the Sky acquisition; and how the combination of these things puts us in a unique position to compete, including in the streaming market.”

Article continues below advertisement

Analysts’ price targets for Comcast

On Thursday, Cowen and Company and Guggenheim raised their price targets for Comcast stock, from $44 to $46 and $52 to $57, respectively. RBC also raised its price target for CMCSA from $42 to $44. Similarly, J.P. Morgan announced a price target of $51 on Comcast stock for December 2020 with an “overweight” rating.

According to Wall Street analysts, Comcast stock has a mean price target of $50.69, suggesting an estimated upside of 13.0% for the next year. Of the 36 analysts covering Comcast, 21 recommended a “buy,” nine recommended a “strong buy,” and six recommended a “hold.” None of the analysts recommended a “sell” on October 24.

Growth in key metrics

In the third quarter, Comcast reported better-than-expected high-speed Internet customer growth. The company added net 379,000 high-speed Internet customers, surpassing analysts’ expectations of 344,000 net additions.

In the third quarter, revenue from the high-speed Internet segment rose 9.3% YoY to $4.7 billion. The company gained a net of 363,000 high-speed Internet customers in Q3 2018. The company ended Q3 2019 with a total of 28.2 million high-speed Internet customers, up 4.9% YoY.

In September, Comcast announced that its Xfinity Flex product would be available at no cost to all of its US Internet-only customers. The company previously charged those customers $5 per month.

However, the company lost a net of 238,000 pay-TV customers, missing analysts’ expectation of 203,000 net losses. In the third quarter, revenue from the video segment fell 0.9% YoY to $5.5 billion.

The company lost a net of 106,000 pay-TV customers in Q3 2018. The company ended Q3 2019 with a total of 21.4 million pay-TV customers, down 2.8% YoY. Comcast is losing pay-TV customers due to stiff competition from low-cost streaming video services like Amazon Prime Video and Netflix.

Article continues below advertisement

Peacock streaming service

Comcast’s NBCUniversal segment reported revenue of $8.30 billion, down 3.5% YoY. In April 2020, NBCUniversal plans to launch a video streaming service called Peacock. The new service is likely to be launched with more than 15,000 hours of content. Next month, Disney plans to launch Disney+, and Apple plans to launch Apple TV+.

Adjusted EBITDA

Comcast has delivered YoY improvement in consolidated adjusted EBITDA of $8.55 billion in the third quarter, up 7.4% YoY. Its adjusted EBITDA increased 6.8% for the Cable Communications segment, while its adjusted EBITDA for the NBCUniversal segment grew 1.7% YoY in Q3 2019.

Article continues below advertisement

Peers’ expectations

Charter Communications (CHTR) plans to report its third-quarter earnings on October 25. CHTR stock is up 52.7% year-to-date. Based on estimates, Charter Communications is likely to report earnings per share of $1.66 in the third quarter. This represents an increase of 22.1% compared to Q3 2018.

Dish Network (DISH) expects to release its third-quarter results on November 5. DISH stock is up 36.8% year-to-date. Based on analyst estimates, DISH is expected to report EPS of $0.61 in the third quarter. This represents a decrease of 25.6% compared to Q3 2018.

Twenty-one of 33 analysts covering Charter Communications rated its stock as a “buy.” CHTR’s mean price target of $446.67 implies a 2.7% upside from the current level. Seven of 19 analysts rated DISH stock as a “buy.” DISH’s price target of $42.50 implies a 24.5% upside potential.

How is Comcast stock placed?

Comcast’s stock price fell 1.9% on October 24. However, Charter Communications and DISH’s stock prices fell 0.1% and 2.2%, respectively, on the day.

Comcast stock is trading 0.4% and 0.6% below its 20- and 50-day moving averages, respectively. It’s also trading 1.7% above its 100-day moving average of $44.07. Comcast’s 14-day relative strength index (or RSI) score is 46, which suggests that the stock is neither overbought nor oversold.

Comcast’s upper, middle, and lower Bollinger Bands are $46.33, $45.04, and $43.75, respectively. On Thursday, the stock closed near its middle Bollinger Band, suggesting that it’s neither overbought nor oversold. On October 24, Comcast’s dividend yield was 1.87%.

With a PE ratio of 14.6x for this year and analysts forecasting the company’s earnings to grow 20%, Comcast stock looks cheap. Next year, analysts expect the company’s earnings and revenues to grow 11.4% and 5.4%, respectively.

Advertisement

More From Market Realist