Is Comcast Stock a ‘Sell’ after Its Q1 Earnings?

Comcast (NASDAQ:CMCSA) stock fell 3.5% on Thursday and closed at $37.63 with a market capitalization of $171.8 billion. The stock fell after the company posted its financial results for the first quarter on Thursday before the market bell. Although the earnings beat analysts’ consensus estimate, the revenue missed the estimates. However, investors were disappointed because the company warned that COVID-19 could hurt advertising and theme parks in the second quarter.

According to a CNBC report, “Comcast shares fell as much as 7%, after being up as much as 2% in premarket trading, after the company said during its earnings call that it would lose about $500 million if theme parks remained closed through June.” The report also said, “advertising will be down significantly in the second quarter. Sky, which also helps drive advertising revenue through sports and other programming, took a hit during the quarter because customers can pause sports packages and it’s unclear when sports will resume.”

Comcast’s Q1 earnings

In the first quarter, Comcast reported an adjusted EPS of $0.71 compared to $0.76 in the first quarter of 2019. The earnings beat analysts’ consensus estimate of $0.68 per share. The cable company has beat the earnings expectations in the past 17 quarters. Comcast generated revenue of $26.61 billion—a decrease of 0.9% from the first quarter of 2019. The company missed Wall Street analysts’ consensus revenue estimate of $26.75 billion.

In the first quarter, Cable Communications’ revenues improved YoY (year-over-year) by 4.5% to $14.9 billion. Meanwhile, NBCUniversal and Sky revenues declined YoY by 7.0% and 5.8%, respectively. The company’s high-speed Internet and wireless segments drove its Cable Communications revenues in the first quarter.

In the first quarter, Comcast reported a free cash flow of $3.33 billion compared to $4.59 billion in the first quarter of 2019. In the past nine quarters, the company has generated a minimum free cash flow balance of $2 billion in each quarter. The net cash provided by operating activities was $5.82 billion in the first quarter. Comcast’s capital expenditures fell 10.1% YoY to $1.88 billion in the first quarter. The company returned $977 million to shareholders in the form of dividends in the first quarter. As of Thursday, Comcast’s dividend yield was 2.44%.

Comcast’s customer metrics

In the first quarter, the revenue from Comcast’s high-speed Internet unit rose by 9.3% YoY to $5 billion due to net additions of 477,000 total high-speed Internet subscribers. The number includes net additions of 466,000 residential high-speed Internet subscribers and net additions of 11,000 business services high-speed Internet subscribers. Analysts forecasted 364,000 net additions of high-speed Internet subscribers in the first quarter. Comcast reported net additions of 375,000 total high-speed Internet subscribers in the first quarter of 2019. At the end of March 31, Comcast’s total high-speed Internet subscribers were at 29.11 million—up 5.5% YoY.

Comcast lost 409,000 traditional video subscribers in the first quarter compared to 121,000 losses in the first quarter of 2019. Analysts forecasted 261,000 net losses of video subscribers in the first quarter. As of March 31, Comcast’s total video subscribers stood at 20.85 million—down 4.7% YoY. The company is losing pay-TV customers due to cord-cutting.

Analysts’ recommendations for Comcast stock

Among the 37 analysts following Comcast stock, 25 recommend a “buy”—down from 27 in the last month. About 12 analysts recommend a “hold”—up from ten in the previous month. None of the analysts recommend a “sell.” Analysts’ mean target price on the stock is $45.41, which implies a 20.7% gain from the current level of $37.63. The consensus target price for the stock has fallen from $48.53 in April—a fall of 6.4%.

After the first-quarter earnings results, Credit Suisse decreased its target price on the stock from $50 to $48. Scotiabank reduced its target price on the stock from $48 to $43. Keybanc downgraded the stock from “overweight” to “sector weight.”

Peers’ performance

Charter Communications (NASDAQ:CHTR) will release its earnings report for the first quarter today. Analysts expect the company’s first-quarter reported revenue to rise by 5% YoY to $11.8 billion. They expect the company to post an adjusted EPS of $2.76 compared to $1.11 in the first quarter of 2019.

Wall Street analysts expect Dish Network’s (NASDAQ:DISH) adjusted EPS to decrease YoY to $0.58 from $0.65. Analysts also expect the company’s revenue to fall 1.2% YoY to $3.1 billion.

Technical analysis

Based on the closing price on Thursday, Comcast stock was trading 1.6% above its 20-day moving average of $37.04. The stock is also trading 0.8% below its 50-day moving average of $37.92 and 9.0% below its 100-day moving average of $41.35. Comcast’s 14-day relative strength index score is 51. The score indicates that the stock isn’t oversold or overbought.

On Thursday, the S&P 500 and the Dow Jones fell by 0.9% and 1.2%, respectively. Charter Communications and Dish Network returned 0.1% and -2.1%, respectively, on the same day.

Read Why Did Comcast Sell Its Entire Stake in Snap Stock? to learn more.