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Comcast

Comcast Corporation, one of the largest cable television operators in the United States, reported better-than-expected revenue in the third quarter as an increase in broadband subscribers helped the cable giant to recover from the COVID-19 woes, sending its shares up about 1.5% on Thursday.

The cable television operator said its revenue for the third quarter of 2020 decreased 4.8% to $25.5 billion and net income attributable to Comcast plunged 37.2% to $2.0 billion. Adjusted net income slumped 18.2% to $3.0 billion. That was better than the market expectations of $24.74 billion.

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Comcast said its earnings per share (EPS) plunged 37.1% to $0.44 in the third quarter, from the same period a year ago. Adjusted EPS fell by 17.7% to $0.65. For the nine months ended September 30, 2020, EPS was $1.55, a 27.9% decrease compared to the prior year. Adjusted EPS down 12.4% to $2.04, the company said in the statement.

At the time of writing, Comcast shares traded 1.5% higher at $42.64; however, the stock is down about 6% so far this year.

Executive Comments

“This third quarter, we delivered the best broadband results in our company’s history. Driven by our industry-leading platform and strategic focus on broadband, aggregation and streaming, we added a record 633,000 high-speed internet customers and 556,000 total net new customer relationships,” said Brian L. Roberts, chairman and chief executive officer.

“Our integrated strategy is also driving results in streaming with nearly 22 million sign-ups for Peacock to date, and we are exceeding our expectations on all engagement metrics in only a few months. And Sky continues to add customer relationships at higher prices while reducing churn to all-time lows in our core UK business.”

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Comcast Stock Price Forecast

Fourteen equity analysts forecast the average price in 12 months at $52.33 with a high forecast of $60.00 and a low forecast of $40.00. The average price target represents a 24.65% increase from the last price of $41.98. From those 14 analysts, 10 rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $57 with a high of $72 under a bull-case scenario and $37 under the worst-case scenario. The firm currently has an “overweight” rating on the cable television operator’s stock. Comcast had its price objective upped by Barclays to $48 from $46. The brokerage currently has an overweight rating on the cable giant’s stock.

Several other analysts have also recently commented on the stock. BidaskClub downgraded to a “buy” rating from a “strong-buy”. ValuEngine upgraded to a “hold” rating from a “sell” in Sept. Citigroup increased their price objective to $49 from $48 and gave the company a buy rating in Aug. Sanford C. Bernstein upgraded shares of Comcast to an “outperform rating” from a “market perform” and upped their price target for the stock to $52 from $48 in July.

Analyst Comments

“In Cable, we believe continued runway in broadband will offset video declines, with the mix shift driving rising margins and falling capital intensity,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

“At NBCU/Sky, we believe temporary headwinds from macro and COVID-19 have pressured CMCSA multiples, resulting in an attractive risk/reward,” Swinburne added.

Upside and Downside Risks

Upside: 1) Cable competition is overestimated, driving more broadband volume growth versus expects. 2) Faster than expected macro recovery – highlighted by Morgan Stanley.

Downside: 1) Macro uncertainty and COVID-19-related headwinds pressure cyclical legs of the business, primarily at NBCU. 2) Greater regulatory oversight negatively impacts broadband pricing growth.

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