Films, Theme Parks, Broadband To Drive Future Growth For Comcast

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Comcast (NASDAQ:CMCSA) released its Q2 earnings on July 27, beating analyst earnings estimates by 4 cents per share, driven by a 9.8% y-o-y rise in revenues and a 10% surge in adjusted EBITDA. The top line increase was led by the Theme Parks business, which saw a 15.6% increase in revenue compared to the same period last year. The Filmed Entertainment business was boosted by the success of Fate of the Furious, and saw 59% year on year growth. These factors were primarily responsible for a more than 17% rise in NBCUniversal divisional revenue. The Cable Communications business also saw growth of 5.5%, led by 12.6% and 9.2% growth in business services and high speed internet, respectively.

Going forward, we believe that the company’s increased investments in the Theme Parks business, as well as continued high-speed internet momentum, will remain key growth drivers for Comcast.

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Theme Parks Continue To Grow

With an increase in disposable income per capita around the world, there has been steady growth momentum in the Theme Park business. According to Strategyr, the amusement and theme park market is expected to reach $44.3 billion by the end of 2020. To take advantage of this opportunity, Comcast has been increasing its investments in this business, and as a result, it expects a 10% surge in NBCUniversal’s capex in 2017. The company aims to add one new attraction each year in the U.S. to boost its share in this growing market.

Additionally, China will be an important market for theme parks, as the business is expected to grow at over 12% annually in the country over the next few years. Both Walt Disney and Comcast have identified this opportunity; in fact, Disney’s theme park in Shanghai is projected to reach break even in fiscal 2017. Comcast has planned a $3.3 billion investment to build a theme park in Beijing by 2020. These initiatives will likely impact free cash flows negatively in the near term, but that should be outweighed by double digit revenue growth over the long run.

High Speed Internet Still Growing 

While cord cutting resulted in the loss of 47,000 residential video customers for Comcast, it was more than offset by the net addition of 140,000 new residential high speed internet customers. This was driven in part by xFi, the company’s new residential high speed WiFi service. We expect this, plus growth in the company’s MVNO Xfinity Mobile, to drive the high-speed internet business going forward.

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