A Look At Our $38 Price Estimate For Comcast

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The media industry is in a transformative phase, as streaming media and live videos on social media take center stage, threatening the traditional pay TV industry. Nevertheless, Comcast was able to grow its cable revenues from $20.5 billion in 2013 to over $23 billion in 2017 despite the threat of cord-cutting. Currently, we project these revenues to grow to $24 billion in 2018. The company has been periodically increasing the fees for its Cable TV and Internet services and recently announced a new round of fee hikes for these services, in order to grow its revenues accordingly.

We have a $38 price estimate for Comcast, which is about 10% ahead of the current market price. Our interactive dashboard details our forecasts and estimates for the company. Below we outline the key drivers of our price estimate for the company.

Overview Of Estimates

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We expect Comcast to generate around $87 billion in revenues in 2018, and earnings of over $24 billion. Our revenue forecast of $87 billion represents year-on-year growth of around 2%. Of the total expected revenues in 2018, we estimate $54 billion in the Cable TV business and nearly $33 billion in the NBC Universal business. In 2018, we expect Comcast to report a minor loss in cable TV subscribers due to competition and cord cutting measures. While cord cutting is likely to weigh on its revenues, the popularity of Xfinity Double and Triple Play bundling should continue to largely offset these declines. Accordingly, we expect the subscriber losses to have a fairly limited impact on company’s top line going forward. In addition, Comcast is also aggressively pursuing over-the-top (OTT) streaming services, with the launch of Xfinity Stream and the recently rolled out Xfinity Instant TV across markets that the company already serves. Although the company currently does not provide the breakdown for its OTT service, we believe that the streaming service will be instrumental in retaining and attracting consumers for Comcast’s cable offerings.

Cable TV Forecasts

The key drivers for the pay-TV business are the number of subscribers and the average fee per subscriber. Comcast’s Cable TV business provides video, high-speed internet, voice, and security and automation services to residential customers under the Xfinity brand. We have estimated 22.4 million video subscribers in the U.S. with an average monthly fee of $88.80, translating into $23.9 billion in video revenues in fiscal 2018. In addition, we also expect close to 27 million subscribers in high-speed internet markets with an average monthly fee per subscriber of $49, translating into $16 billion in residential high-speed revenues in the same period. We also expect a decline in the company’s voice customers to 11.5 million with an average monthly fee per subscriber of $23, translating into yearly total residential voice revenues of $3 billion. Comcast’s video subscribers and voice subscribers have been declining modestly over the last two years due to stiff competition in the live streaming media and telecom alternatives, respectively. We expect this trend to continue in the near term as well. However, we expect Comcast’s high-speed internet customers to grow going forward, as the company could benefit from initiatives such as Xfinity Mobile, a wireless service through 16 million WiFi hot-spots.

 

Comcast saw its stock grow nearly 15% in 2017, due in part to its streaming products and X1 services. However, the stock is now down more than 15% year-to-date as of March 26. Going forward, we expect the company to benefit from its streaming services and broadband services in 2018. Our valuation dashboard suggests that Comcast’s valuation still has more upside, and we expect the company to grow at a similar pace as that of 2017 going forward.

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