VALUATION HIGHLIGHTS

1. Cable Communications constitute 78% of the Trefis price estimate for Comcast's stock.

WHAT HAS CHANGED?

Q3 2023 Earnings

Comcast reported better-than-expected Q3 2023 earnings. The company's adjusted revenue rose by 1% year-over-year to $30.1 billion, while adjusted earnings stood at $1.08 per share. The company's theme parks and wireless business fared well, with losses from the Peacock streaming service also narrowing.

Comcast's Wireless business is gaining traction

Comcast’s Xfinity Mobile business, which relies on an MVNO (mobile virtual network operator) agreement with Verizon, has been gaining traction. The service had a total of 6 million customers as of Q2 2023, up from about 4.6 million in the year-ago quarter. This wireless product has more room to grow, given that just 10% of Comcast’s base of residential broadband customers are presently subscribed to the offering.

BUSINESS SUMMARY

Comcast is a global media and technology company that has three broad operating segments. (1) Comcast Cable: one of the largest providers of high-speed internet, video, and voice services in the United States. (2) NBCUniversal: Operates cable networks, broadcast television, filmed entertainment, and theme parks.(3) Sky: Based in Europe, Sky operates video, high-speed internet, voice, and wireless phone services and also runs the Sky News broadcast network and Sky Sports networks.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Comcast's value that present opportunities for upside or downside to the current Trefis price estimate for Comcast:

Cable Communications EBITDA Margin: Comcast's cable division's EBITDA margins stood at about 44.6% in 2022. Trefis expects the metric to remain roughly flat going forward. However, if Comcast is able to boost margins to around 50% driven by higher-priced broadband plans and better cost management, there could be a 10% upside to our price estimate.

Comcast Broadband Subscriber Fees: We estimate this figure to grow from $60 levels in 2022, to $76 by the end of our forecast period in 2029. However, there could be an upside of more than 10% to our price estimate if this figure were to be north of $95 in the coming years. On the other hand, there could be a downside of around 5% to our price estimate, if the company is unable to raise the prices amid increased competition in the broadband market.

For additional details, select a driver above or select a division from the interactive Trefis split for Comcast at the top of the page.

SOURCES OF VALUE

We believe that Comcast's Cable Communications business is the biggest driver of its valuation for a couple of reasons.

High number of subscribers

Comcast had 15.6 million pay-TV subscribers and about 32 million broadband subscribers as of 2022. Going forward, we expect that broadband subscribers will continue to grow while the pay-TV subscriber base will shrink in the long term.

High average monthly fees per subscriber

There is quite a difference between fees per subscriber for Comcast's pay-TV and broadband subscribers. Comcast is making on average $114 per month from its pay-TV subscribers compared with $64 per month for broadband subscribers.

KEY TRENDS

Comcast takes streaming more seriously

With pay-TV services facing competition from online streaming companies such as Netflix, many cable TV users are cutting the cord. However, Comcast has been taking steps to cater to this growing market. The company's direct-to-consumer streaming service Peacock was launched in July 2020, offering both ad-supported and ad-free subscription options. The business has been gaining traction, with its subscriber base rising from around 9 million as of December 2021 to over 15 million as of late 2022.

Universal studio's focus on franchises

Comcast's Universal movie studio has been increasingly focusing on movie franchises, which have larger audiences and greater brand recognition, making them more likely to succeed than standalone films. Some popular franchises from the company include Fast and Furious, Despicable Me, and Fifty Shades. Universal also successfully revived the fan-favorite Jurassic Park franchise. The studio also has other relatively lower grossing franchise properties such as Pitch Perfect, Jason Bourne, Neighbors, Ted, The Purge, Snow White, and the Huntsman, etc.

NBCU is expanding in China with a massive theme park project in Beijing

NBCUniversal, along with Beijing Shouhuan Cultural Tourism Investment Co. (a consortium of four state-owned companies), opened a new Universal theme park in Beijing in September 2021. The park is spread over a 300-acres and will eventually expand to 1,000 acres. The property also includes two hotels. Amusement parks in China are among the most attended in the world and this could help to drive NBCUniversal's theme park business.