Inside Comcast’s Peacock Streaming Strategy

Comcast’s (CMCSA) NBCUniversal segment plans to launch Peacock, its streaming video service, in April 2020. The service would debut with 15,000 hours of overall video content, includes a new original reboot of Saved by the Bell. Starting in 2021, it would have exclusive rights to previously aired episodes of shows like The Office, Cheers, and Parks and Recreation.

However, the service won’t include its 2020 Olympics coverage. Peacock is currently beta-tested in various iterations. NBCUniversal CEO Steve Burke intends to host an analyst meeting on January 16, 2020, to provide more information about the upcoming service.

Comcast’s Peacock streaming service

NBCUniversal intends to distinguish the Peacock streaming service from its competitors through its pricing structure and user interface. According to a December 20 CNBC report, “Users will be greeted by streaming content, similar to turning on traditional television, according to people familiar with the matter. The showcased video could be a live offering from NBC News Now, NBC’s free streaming news service that will integrate with Peacock, or an on-demand show.”

The report added, “NBCUniversal executives are trying to position Peacock as a valuable streaming service while not cannibalizing the traditional pay-TV business. NBCUniversal owns a number of cable TV stations, including CNBC, MSNBC, Bravo, USA, E!, Golf Channel and others.”

Peacock’s customers would have three options in April 2020 when the service starts, reports CNBC. There would be an ad-free version of Peacock for $10 per month and a limited-ad version for $5 per month. Both versions would likely have access to Peacock’s entire library. The company would offer this service at no charge to all users for an ad-supported version. The free version is not likely to include The Office, for which NBCUniversal paid $500 million.

Over-the-top market attracting new players

Comcast’s Peacock plans to join a crowded market for video streaming services, which includes Disney+, Apple TV+, and Netflix. In May 2020, AT&T’s WarnerMedia segment also plans to launch an over-the-top service called HBO Max. Apple TV+ costs $4.99 per month, and Disney+ is priced at $6.99 per month. HBO Max would be priced at about $14.99 per month.

Comcast hasn’t provided any customer targets for Peacock but anticipates the streaming service to break even in five years.

In the third quarter, Comcast lost 238,000 pay-TV subscribers compared to net losses of 106,000 customers in the third quarter of 2018. As of September 30, the cable company had 21.4 million pay-TV customers, down 2.8% year-over-year (or YoY). Pay-TV service operators are losing customers due to intense competition from over-the-top service providers.

Comcast’s Q3 adjusted EPS rose 21.5% YoY to $0.79 and beat analysts’ estimate of $0.75. In the third quarter, the company reported revenues of $26.8 billion, which was in line with analysts’ consensus estimate of $26.8 billion. Also, quarterly revenues marked YoY improvement of about 21.2%.

Analysts’ recommendations and target prices

Today, 81.1% of the 37 analysts covering Comcast stock recommend a “buy,” while 18.9% of the analysts have a “neutral” view. The current median target price of $50 reflects a potential upside of 13.4% from the closing price of $44.09 on December 20.

On December 20, TD Securities reduced the target price for Comcast stock from $57 to $54 with a “buy” rating.

Comcast stock’s valuation

Analysts expect Comcast’s revenue to rise 15.1% in 2019 to $108.7 billion compared to 11.8% growth the previous year. Its sales could increase 5.3% in 2020 to $114.5 billion. Analysts also expect its adjusted EPS to rise 21.2% in 2019 compared to 23.8% growth in 2018. However, its earnings could likely rise 8.4% in 2020.

Comcast stock has a PE ratio of 13.18x and an enterprise-value-to-revenue ratio of 2.67x for 2020.

Stock performance

Comcast stock closed 1.0% higher on December 20 and ended the trading day at $44.09. The stock was trading 6.7% below its 52-week high of $47.27 and 35.2% above its 52-week low of $32.61. Based on the December 20 closing price, Comcast’s market cap stood at $200.6 billion. On a year-to-date basis, its stock rose around 29.5%.

Comcast closed 1.1% above its 20-day moving average of $43.63. The stock also closed 0.9% and 0.8% below its 50-day and 100-day moving averages of $44.50 and $44.49, respectively. The stock’s 14-day relative strength index score of 52 signified that it was neither oversold nor overbought.

Comcast’s upper, middle, and lower Bollinger Band levels are $44.81, $43.63, and $42.44, respectively. On December 20, it closed near its middle Bollinger Band level, which also indicated that it was neutral.

Please read Comcast Announces Price Hikes Starting December 18 to learn more.