Comcast stock historically has not made big runs from breakouts. That’s not to say that CMCSA stock doesn’t have good years.
Comcast (CMCSA) stock rose 32% in 2019, trading mostly in line with the S&P 500. But in 2020, Comcast stock underperformed when compared with cable TV companies Charter Communications (CHTR) and Altice (ATUS).
The biggest U.S. cable TV company, Comcast also owns media firm NBCUniversal and U.K.-based Sky. Comcast’s high-speed internet services to homes and businesses remains its biggest growth driver, despite two big acquisitions.
Comcast on Jan. 28 reported earnings and revenue for the December quarter that fell from a year earlier but topped estimates.
Also, Comcast signaled that it could resume repurchasing its own stock in the second half of 2021.
“Management announced intentions to begin repurchasing shares in second half, 2021, an announcement sooner than expected, signaling a vote of confidence on free-cash-flow durability,” Cowen analyst Gregory Williams said in a recent note to clients. The Cowen analyst added that new buybacks may signal that Comcast spent less than speculated in a government auction of 5G wireless spectrum.
CMCSA stock got off to a rough start in early 2020 when its outlook for full-year free cash flow came in below expectations amid investments at NBCU and Sky.
Then the coronavirus pandemic hit. The Covid-19 outbreak raised worries over theme park attendance, NBCU film studio revenue and the outlook for satellite TV broadcaster Sky.
With a late 2020 breakout, driven by broadband services and positive vaccine news, Comcast stock has now closed much of what had been a valuation gap vs. peers Charter and Altice. All three companies displayed solid growth in broadband services amid a shift to remote work and at-home learning.
As Covid-19 vaccinations gain traction, Comcast stock bulls expect improved results at NBCU and Sky. Successful vaccines could encourage people to get out more and help revive Comcast’s theme park and movie businesses.
But CMCSA stock faces many challenges, such as the rollout of wireless services and the launch of its Peacock-branded video streaming service.
Comcast Stock Fundamental Analysis
Comcast’s cable business churns out the lion’s share of free cash flow, even though it continues to lose video subscribers. Consumers are switching to on-demand internet streaming services, but people still need internet services for video streaming. So growth in broadband services has been a bright spot. In addition, analysts expect Comcast to push through mid-single-digit price hikes for both video and broadband services in 2021.
Even before the coronavirus pandemic hit, NBCU struggled with ongoing changes in the entertainment business. Advertising continues to shift from broadcast TV to internet and mobile platforms. On its third-quarter conference call, Comcast discussed NBCU’s restructuring to shift resources from broadcast TV to its video streaming business.
Including layoffs, the restructuring is expected to result in $700 million in charges in 2020.
At a UBS conference on Dec. 8, NBCU Chief Executive Jeff Shell said content production for the 2021 film slate is largely complete. He said TV production for about 30 shows was up and running.
As of Sept. 30, Comcast had 30.06 million broadband customers, including homes and businesses. That was up nearly 12% from two years earlier. Comcast had 20 million video subscribers, down 9% from two years earlier.
Comcast Broadband Business Thrives Amid Covid-19
In the fourth quarter of 2020, adjusted earnings fell nearly 29% to 56 cents a share. Revenue slipped 2.5% to $27.71 billion.
Also, Comcast said it added 538,000 broadband customers, topping expectations of 490,000. The company lost 248,000 video subscribers, up from 149,000 that disconnected service in the year-earlier period.
Cable communications revenue rose 6.3% to $15.7 billion.
Comcast added 246,000 wireless subscribers vs. 261,000 a year earlier.
In addition, Comcast said the new Peacock-branded, video streaming service ended the year with 33 million users, up from 22 million as of Sept. 30.
NBCUniversal revenue fell 18% to $7.5 billion as theme park sales fell 63% to $579 million.
Broadcast TV revenue dived 12% to $2.8 billion.
The big question is how soon theme parks can return to profitability while operating at lower capacity with fewer visitors. Orlando parks are operating at 30% to 35% of capacity, analysts say.
Comcast aims to open its $580 million Super Nintendo World attraction in Japan in early February. A theme park in Beijing, China, is on track to open in May or June.
Comcast Expands Into Wireless Services, Video Streaming
The Peacock video streaming service competes with Walt Disney (DIS), AT&T’s HBO, Netflix (NFLX) and others. Netflix stock is not in a buy zone. Disney stock is extended, but analysts are upbeat on its push into direct-to-consumer services.
Whether the 2021 Summer Olympic games will be held is one wild card for the Peacock service. Meanwhile, Macquarie projects nearly 50 million Peacock users and $1.1 billion in advertising revenue in 2022.
Comcast Stock Technical Analysis
After forming a huge cup-with-handle pattern earlier in 2020, and a new flat base in the fall, Comcast broke out from that base Nov. 9 with a buy point of 47.60. It then posted three weekly gains and began forming another flat base, with an entry point of 52.59.
Comcast stock rallied on record broadband subscriber growth in the September quarter. CMCSA stock also gained amid positive coronavirus vaccine news.
But the company keeps forming bases on top of or next to one another, and has yet to make a sustained run. Further, Comcast stock holds a Relative Strength Rating of only 50 out of a best-possible 99. Also, the relative strength line of CMCSA stock was net flat in the fourth quarter.
In addition, CMCSA stock has an Accumulation/Distribution Rating of C-minus. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. On an A+ to E scale, the rating measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Other Comcast Stock Factors To Consider
Since the days of cable industry pioneer John Malone at Tele-Communications Inc., free cash flow has been a key metric for cable TV companies.
Bank of America expects Comcast to churn out $14.2 billion in free cash flow in 2020, down from $15.74 billion in 2019. BofA sees that figure barely rising to $14.3 billion in FCF in 2021 and then picking up the pace to hit $18.24 billion in 2022.
One question is whether Comcast will increase buybacks of its own shares if free-cash-flow growth bounces back. Money could go elsewhere.
There’s speculation that Comcast and Charter are bidders in a government auction of midband radio spectrum for 5G wireless services.
Another issue is whether Roberts family-controlled Comcast will continue to make acquisitions.
Ralph Roberts co-founded Comcast in the 1960s. A dual-class stock structure gives the Roberts family control of about a third of the company’s voting power.
Is Comcast Stock A Buy Now?
What makes CMCSA stock different from cable industry peers is ownership of media and entertainment firm NBCUniversal and U.K.-based Sky. Investors playing the cable space may prefer less diversified pure plays such as Charter or Altice.
Satellite TV broadcaster Sky remains a “show me” risk for investors amid broadband investments and equipment upgrades.
CMCSA stock has edged up following its fourth-quarter earnings report. On Feb. 9, Comcast stock moved into a 5% buy zone just above the 52.59 entry. On a technical view, CMCSA stock is a buy. But some ratings could be better.
Its habit of continuing to form bases next to each other is a bearish sign. Comcast stock is essentially a laggard that hasn’t outperformed the S&P 500 since May 2017. Unless Comcast pulls a drastic move, investors would be better off putting money into an S&P index fund or an ETF. The latter two options have more moneymaking potential without posing the risk of investing in a single stock.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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