With Comcast Up 32% this Year, Is More Upside Ahead?

Yesterday, Comcast (CMCSA) rose 0.5% and closed at $44.81, with a market capitalization of $203.9 billion. The stock is trading at a discount of 5.2% to its 52-week high of $47.27. It’s also trading at a premium of 37.4% to its 52-week low of $32.61.

Comcast stock has risen about 31.6% on a year-to-date basis as of Wednesday. The company’s robust financial performance drove its share prices higher in 2019. The S&P 500 and the Dow Jones have risen 24.5% and 19.8%, respectively, during the same period. Meanwhile, Charter Communications (CHTR) and Dish Network (DISH) stocks have risen 68.1% and 43.5%, respectively.

Analysts’ recommendations on Comcast stock

Overall, analysts have “buy” ratings on CMCSA stock. Among the 36 analysts who cover Comcast, 83.3% give it a “buy” rating while 16.7% say “hold.” None of the analysts recommend a “sell.”

Currently, analysts have a 12-month mean target price of $51.46 for CMCSA. On November 19, the company was trading at a discount of 14.8% to analysts’ 12-month target price. The stock’s median target price was $52 as of the same date.

Charter Communications’ stock was rated as a “buy” by 21 out of 33 analysts or 64% of the analysts surveyed.

Comcast’s valuation

Comcast stock is trading at 14.52x its 2019 estimated EPS of $3.09 and at 13.06x its 2020 estimated EPS of $3.43. Both these estimates look attractive, based on the company’s projected EPS growth rates of 21.2% for 2019 and 11.0% for 2020.

Financial performance

In the third quarter, Comcast’s adjusted EPS of $0.79 not only surpassed analysts’ estimate of $0.75 by 5.3% but were also 21.5% higher than its earnings of $0.65 in the third quarter of 2018. The company has surpassed earnings estimates for the past 15 quarters.

Comcast posted revenue of $26.83 billion in the third quarter of 2019, surpassing the consensus estimate of $26.77 billion by 0.2%. However, its top line grew 21.2% year-over-year from $22.1 billion. The year-over-year revenue increase was due to the growth in the company’s Cable Communications segment, offset by a decline in its NBCUniversal and Sky businesses.

In the third quarter, the Cable Communications segment’s revenue rose 4.0% year-over-year on the back of growth in high-speed Internet, business services, wireless, and other revenue. However, video and voice revenue fell in the third quarter due to a decline in its number of customers. Advertising revenue also fell, by 11.8% to $603 million. NBCUniversal and Sky’s revenues fell 3.5% and 4.2%, respectively.

Analysts expect Comcast’s sales to rise 15.1% year-over-year to $108.8 billion in 2019 and 5.3% to $114.6 billion in 2020. Its sales will likely reach $116.1 billion in 2021. Analysts also expect the cable company’s adjusted EPS to rise 21.2% to $3.09 in 2019, 11.0% to $3.43 in 2020, and 6.1% to $3.64 in 2021.

Comcast is losing video customers

Comcast lost 222,000 residential video subscribers in the third quarter, compared to 95,000 losses in the third quarter of 2018. The traditional pay-TV service providers are struggling to grow their video customer base due to intense competition from online video streaming services like Netflix, Amazon, and Hulu.

In the September quarter, Charter Communications lost 77,000 residential video customers. Meanwhile, AT&T (T) also lost 1.2 million traditional pay-TV subscribers.

As a result, Comcast’s NBCUniversal segment is planning to launch an over-the-top streaming service called Peacock in April 2020. The service will initially launch with 15,000 hours of content.

High-speed Internet subscribers

Amid video subscriber losses, Comcast’s Cable segment is gaining from its high-speed Internet business. In the third quarter, its high-speed Internet revenue increased 9.3% year-over-year to $4.7 billion.

Comcast also added 359,000 residential high-speed Internet net customers. Its residential high-speed Internet net customer additions rose from 334,000 and sequentially from 182,000. Charter added 351,000 net residential Internet subscribers in the quarter.

Dividends

Comcast exited the third quarter of 2019 with free cash flows of $2.1 billion, compared to $3.1 billion in the third quarter of 2018. The cable giant has been using its steady free cash flows to reward investors.

In the third quarter, Comcast paid $955 million in dividends—but it didn’t buy back any shares. At the end of November 19, Comcast’s dividend yield stood at 1.87%.

Comcast stock’s technical levels

On November 19, Comcast closed 0.3% below its 20-day moving average of $44.93 and 1.1% below its 50-day moving average of $45.29. The company was also trading 0.6% above its 100-day moving average of $44.54.

Comcast’s 14-day MACD is -0.12, which suggests a downward trading pattern. Meanwhile, the company’s 14-day relative strength index score of 48 indicates that the stock isn’t overbought or oversold. On November 19, the stock closed near its middle Bollinger Band level of $44.93, which also indicates that it’s neither overbought nor oversold.

Take a look at Video Services: Comcast versus Dish Network and How Comcast Stacks Up in the Streaming Wars to learn more. Also check out Altitude Sports Sues Comcast in Antitrust Lawsuit.