Comcast reported a stronger than expected set of Q1 2022 results, with revenue rising 14% year-over-year to $31 billion and adjusted EPS coming in at $0.86, about 13% higher than last Q1 2021. Growth was driven primarily by the NBCUniversal segment, which saw a boost in sales driven by the Super Bowl and Beijing Olympics as well as a robust recovery in the theme park business. However, Comcast's broadband subscriber growth continued to slow, with the company adding just about 180,000 paying broadband subscribers over the quarter.
Comcast recently unveiled its direct-to-consumer streaming service called Peacock, featuring content that will include shows such as The Office and Parks and Recreation. The service was launched in July 2020. An ad-supported version of the service is available for free to Comcast's cable subscribers. Peacock has been able to achieve 22 million subscribers as of the end of November 2020. Shortly after announcing the services, the company also announced that it would make its Flex streaming stick free for cable customers.
Comcast's Cable TV business provides video, high-speed internet, voice, and security and automation services to residential customers under the Xfinity brand. Video competition from virtual MVPDs has been challenging lately, which resulted in Comcast's residential video subscriber base declining steadily from 21 million in 2018 to just about 17.5 million in 2021. However, the company is working on its high-margin connectivity businesses, residential high-speed Internet, and business services, in order to offset this cord-cutting pressure. The company's total broadband subscriber base has grown from around 27 million in 2018 to around 32 million in 2021, with average revenues per user rising by close to 15%.
NBCUniversal constitutes approximately 30% of Comcast’s total revenues in 2021 and includes the cable and broadcasting networks, theme parks, and movie businesses. NBCUniversal’s theme park business is trending well following the easing of Covid-19 restrictions and is generating stable cash flow for the company with the advertising and distribution operations also driving growth. Consequently, we believe that NBCUniversal will continue to perform exceedingly well for Comcast in the coming quarters.
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.
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% in 2021. Trefis expects the metric to grow slightly to about 45% by the end of our forecast period. 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 5% upside to our price estimate.
Comcast Broadband Subscriber Fees: We estimate this figure to grow from $60 levels in 2021, to $75 by the end of our forecast period. 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.
We believe that Comcast's Cable Communications business is the biggest driver of its valuation for a couple of reasons.
Comcast had around 17.5 million pay-TV subscribers and 32 million broadband subscribers as of 2021. Going forward, we expect that broadband subscribers will continue to grow while the pay-TV subscriber base will shrink in the long term.
There is quite a difference between fees per subscriber for Comcast's pay-TV and broadband subscribers. Comcast is making on average $110 per month from its pay-TV subscribers compared with $60 per month for broadband subscribers.
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, forging a deal to distribute Netflix on its Xfinity platforms, with plans to launch its own streaming video service, dubbed Peacock in 2020. The company also said that it would offer its Flex streaming box for free to cable customers.
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.
NBCUniversal, along with Beijing Shouhuan Cultural Tourism Investment Co. (a consortium of four state-owned companies), opened a new Universal theme park in Bejing 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.