Comcast (NASDAQ:CMCSA) recently released its Q2 earnings. While video subscriber losses continued, the company hopes that these losses will stop once all subscribers shift to its digital platform. Comcast is aggressively pursuing broadband and digital voice subscriber through bundled offers and so its story is quite similar to that of its primary competitor Time Warner Cable (NYSE:TWC). Cable companies like Comcast are increasingly competing with telecom operators like AT&T (NYSE:T) and Verizon (NYSE:VZ) as well as satellite players like DirecTV (NASDAQ:DTV).
Our price estimate for Comcast’s stock stands at $27.50, implying a premium of about 30% to the market price.
While the company lost about 238,000 video subscribers, it gained 144,000 broadband and 193,000 digital voice subscribers in Q2 2011. [1] The video subscriber losses have occurred mainly on the analog platform where ARPU (average revenue per user) for such subscribers tend to be lower compared to the digital platform. Therefore to some extent, revenue losses are covered by gains in digital subscribers. Moreover, the ARPU for broadband is growing due to the adoption of higher priced tiers that are further offsetting the losses.
Will this trend continue?
While one might presume that the current softness in the economy and the debt crisis in the U.S. is casting a shadow over the growth prospects for Comcast. However so far the growth in broadband and digital voice subscriptions has been solid. If the company manages to promote its bundled services and keep its competitive pricing as a result of these bundles, it may continue gaining these subscribers.
See our complete analysis for Comcast’s stock.
Notes:- Comcast’s SEC Filings [↩]
