How Is Comcast Likely To Grow In The Next 2 Years?
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. We project these revenues to grow to $24 billion in 2018. The company has been periodically increasing 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 and offset subscriber pressure.
Going forward, we expect Comcast’s revenue to grow by nearly $4 billion (2.4% CAGR) through fiscal 2019. To arrive at our fiscal 2019 net revenue estimates for Comcast, we have broken down the revenue and estimated separately. We have also created an interactive dashboard which provides a detailed analysis of how to arrive at this growth number. You can make changes to these variables to arrive at your own revenues estimates for the company. We have a $38 price estimate for Comcast, which is around 10% ahead of the current market price.
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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. Comcast’s video subscribers and voice subscribers have been declining modestly over the last two years due to stiff competition from 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.
We have estimated 22.3 million video subscribers in the U.S. with an average monthly fee of nearly $91, translating into $24.3 billion in video revenues in fiscal 2019. In addition, we also expect close to 28 million subscribers in high-speed internet markets with an average monthly fee per subscriber of $50, translating into $16.8 billion in residential high-speed revenues in the same period. We also expect a decline in the company’s voice customers to 11.4 million with an average monthly fee per subscriber of $22.50, translating into yearly total residential voice revenues of $3.1 billion.
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 29. We expect the company to benefit from its streaming services and broadband services in the near term. Our valuation dashboard suggests that Comcast’s valuation still has more upside, and we expect the company to grow at a similar pace as 2017 going forward.
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