Comcast Is Fairly Valued But These Factors Could Drive Stock Higher

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Upside
43.07
Market
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CMCSA
Comcast

Comcast’s (NASDAQ:CMCSA) stock is trading roughly in-line with our price estimate, which begs the question whether there is a possibility of unlocking further value? Below we present a scenario that can unlock more value from Comcast’s stock and take it even higher. This essentially revolves around an improvement in its pay-TV business and a continuation of the recent attractive trends in its broadband business.

See our complete analysis for Comcast

Broadband Business Growth

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In recent years, Comcast has not only gained share in the broadband market, but has also managed to grow its average revenue per user. We currently forecast these metrics to grow at a slower rate in the future due to high competition and market saturation.

In a scenario where Comcast can manage to increase its revenue per broadband subscriber at the current rates and grow its broadband market share to 22% by the end of our forecast period (continuing with the recent trend) and, in the process, improve its gross margins as well, this can result in a 10% upside to our current price estimate. This extrapolation is purely based on the recent suggestive trends and the rate of increase observed in the past couple of years.

Pay-TV Share Gains

With the Xfinity brand encompassing broadband, voice, pay-TV and streaming, Comcast is making lucrative bundles to sell to its customers. The addition of Xfinity Streampix and an improvement in customer service will likely make a difference and help the company in turning around its subscriber losses. However, this does not necessarily guarantee an upside as most of it is already priced in our price estimate.

To generate further upside, Comcast will need to actually start gaining subscribers at a competitive pace, as we have seen its telco and satellite rivals in the pay-TV market start to do. This will lead to an increase in market share as opposed to a declining trend observed in the recent past.

If Comcast can manage to reach 24% market share, a level that it held in 2007, there can be another 5% to 10% upside to our price estimate.

Our price estimate for Comcast stands at $32.55, roughly in-line with the market price.

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