Summary
- Comcast derives the majority of its earnings from its cable and internet business.
- Although cord-cutting is accelerating, Comcast is positioning itself well to maintain its revenue and earnings.
- I have some concerns about Peacock, but it has the content to jump into the streaming conversation.
- Comcast is undervalued, and should outperform from these levels.
Thesis
Comcast (NYSE:CMCSA) is a conglomerate that operates in one part very much like Disney (NYSE:DIS) or AT&T (NYSE:T) with its NBCUniversal and Sky segments, and in the other as a cable/internet utility similar to Charter Communications (NasdaqGS:CHTR). Much has been made of cord-cutting, but Comcast has managed to offset the effects with price increases and strong growth in its internet services. The prevailing sentiment seems to be bearish on Peacock, but I see the free ad-supported tier as a good way to get subscribers in the door considering how late to the game CMCSA is. Ultimately, the company controls a massive content library, which I assess to be behind only DIS and likely ViacomCBS (NYSE:VIAC), and the company's sports contracts and existing cable subscriber base leads me to believe the company will outperform on existing subscriber estimates. Although the company is not as attractively valued as VIAC, I believe that the risk is lower based on CMCSA's stable internet business, and CMCSA is likely to continue to beat the market. I am bullish and own shares, with a price target of ~$65 with a 3-5 year time horizon.
The Business
As I discussed above, Comcast operates as both a cable television and internet utility, which I'm sure most of you know. Due to cable companies' proclivity for burdensome fees, contracts, and price hikes, they are not generally well-liked, and Comcast is no exception. I cut the cord years ago, and have never regretted it. I take that back. When I tried to figure out getting my antenna to work to watch football, I regretted it slightly, but ultimately I ended up just paying for one of the streaming cable services long enough to watch football and then canceled it again.
