Comcast (NASDAQ:CMCSA) plans to host its Q2 earnings call on Wednesday. Here we present few key areas of Comcast’s earnings that investors should watch. While we expect there will be some discussion around its NBCUniversal business, Comcast’s core businesses of broadband Internet and cable remain by far the most important items to consider. It would also be useful to compare Comcast’s core business metrics with those of its competitors like Time Warner Cable (NYSE:TWC), DirecTV (NASDAQ:DTV) and Dish Network (NASDAQ:DISH). Our price estimate for Comcast is $27.40 and implies a premium of roughly 15% to the market price.
Pay-TV Subscriber Trend
One of the problems that Comcast has suffered in the past is the loss of pay-TV market share. Its market share fell from more than 24% in 2007 to about 21% in 2010 as the company continued to lose subscribers to satellite companies and telecom operators. Although the company has been gaining digital subscribers, its analog cable subscription drops have been more than offsetting the digital gain. If last earnings were any indicator, the trend of subscriber losses seems to be improving and should be one of the key indicators about near-term performance of Comcast’s pay-TV business, which constitutes almost 25% of its stock value as per our estimates.
Broadband & Pay-TV ARPU Trend
While average broadband fee has increased in past year, the average pay-TV subscriber fee has been falling for past few years as per our estimates. However, during last earnings release it was clear that Comcast has been getting more high-value subscribers which could have a positive impact on broadband and pay-TV ARPU. We expect to use data released during upcoming earnings to better understand viability of this trend in longer-term.
Don’t Be Distracted With Noise Around NBCUinversal
While this is an important new business for Comcast, we urge investors to avoid getting caught up in the noise around this business due to high profile nature of this acquisition.
We estimate that this business, in combination with Comcast-owned channels previously, constitutes about 16% to the company’s value. Within this division, cable networks are most important due to their higher profit margins. Therefore we warn the investors to not worry too much around trends in broadcasting and other NBCUniversal businesses like theme parks & filmed entertainment because these are hardly worth anything to Comcast.
