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Can Comcast’s Peacock Lead Its Stock Up in 2020?

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Comcast’s (CMCSA) NBCUniversal segment intends to launch a direct-to-consumer ad-supported video-streaming service called Peacock in April 2020. The service is likely to launch with 15,000 hours of content. It will include back episodes of popular shows such as The Office, Cheers, and Parks and Recreation. The company is hosting an analyst meeting on January 16, 2020, to provide more details about the upcoming service.

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Comcast’s Peacock

Comcast intends to price an ad-supported version of Peacock at $4.99 per month, according to a Cord Cutters report on December 17. In addition, the ad-free version of Peacock will cost $10 per month.

According to a FierceVideo report on December 5, “The company said its ad-supported service will be available at no cost to NBCUniversal’s pay TV subscribers in the U.S. and major international markets, and that Comcast Cable and Sky will provide the service to their 52 million subscribers.” The report added, “An ad-free version will also be available for a fee and non-pay TV customers can purchase a subscription to the service.”

However, Comcast is considering offering an ad-supported version of Peacock free for everyone, as per a CNBC report on November 1.

Online streaming market attracting new players

The over-the-top video-streaming space appears to be getting crowded with various recent or planned launches, including Apple TV+, Disney+, and HBO Max.

In November, Apple (AAPL) launched Apple TV+, while the Walt Disney Company (DIS) launched Disney+. In addition, AT&T’s (T) WarnerMedia segment is preparing to launch a direct-to-consumer video-streaming service called HBO Max in May 2020. Apple TV+ is priced at $4.99 per month, while Disney+ costs $6.99 per month or $69.99 per year. HBO Max will cost $14.99 per month.

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Comcast’s financial performance

In the third quarter, Comcast’s adjusted EPS rose 21.5% YoY (year-over-year) to reach $0.79. The company’s earnings were 5.3% higher than Wall Street analysts had expected for the quarter. Its adjusted net income grew significantly, reaching $3.7 billion compared to $3.0 billion in the third quarter of 2018.

In the third quarter, Comcast reported total revenue of $26.83 billion—higher than analysts’ consensus estimate of $26.77 billion. The company’s third-quarter revenue rose 21.2% YoY from $22.1 billion in the third quarter of 2018. The YoY increase in its revenue was mainly the result of strong customer growth.

In the third quarter, Comcast added 379,000 net broadband customers compared to 363,000 net additions in the previous year’s quarter. The company ended the third quarter of 2019 with 28.2 million broadband customers, up 4.9% YoY. In the quarter, its broadband revenue rose 9.3% YoY to $4.7 billion.

In the third quarter, Comcast lost 238,000 pay-TV customers compared to 106,000 net losses in the previous year’s quarter. The company ended the quarter with 21.4 million pay-TV customers, down 2.8% YoY. Its video revenue fell 0.9% YoY to $5.5 billion. The company is struggling to grow its pay-TV customer base due to competition from direct-to-consumer video-streaming services such as Amazon, Netflix, and Hulu.

In the third quarter, Charter Communications (CHTR) added 351,000 residential broadband net customers, while it lost 77,000 pay-TV customers. It reported EPS of $1.74 on total revenue of $11.45 billion.

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Analysts’ recommendations and target prices

Among the 37 analysts covering Comcast stock, 30 have “buy” ratings, unchanged from the previous month. About seven analysts have “hold” ratings on the stock, up from six in November. No Wall Street analysts call CMCSA a “sell” right now. As of December 17, analysts have given it a 12-month mean target price of $51.14. Based on its December 17 closing price, its price target suggests a potential upside of about 17.9%.

According to The Fly on December 17, Morgan Stanley analyst Benjamin Swinburne said, “The implied valuation of NBC and Sky have fallen due to market worries about NBC’s exposure to cord-cutting and streaming investments and Sky’s macro headwinds.” The report added, “However, in about a month, NBC will have the opportunity to frame the upside potential of its Peacock streaming service and shortly thereafter he expects parent Comcast to report solid Q4 cable results.” The analyst maintained an “overweight” rating and price target of $53 on Comcast stock.

Stock performance

Comcast stock closed 0.3% lower on Tuesday and ended the trading day at $43.39. The stock was trading 8.2% below its 52-week high of $47.27 and 33.1% above its 52-week low of $32.61. At Tuesday’s closing price, Comcast’s market cap stood at $197.4 billion. On a year-to-date basis, its stock was up around 27.4%.

Comcast closed 0.6%, 2.6%, and 2.5% below its 20-day, 50-day, and 100-day moving averages of $43.67, $44.53, and $44.48, respectively. The stock’s 14-day relative strength index score of 45.5 signified that it was neither overbought nor oversold.

Comcast’s upper, middle, and lower Bollinger Band levels are $45.06, $43.75, and $42.44, respectively. On December 17, it closed near its middle Bollinger Band level, which also suggested that it was neutral.

Read Video Services: Comcast versus Dish Network to learn more.

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