Has Comcast’s Stock Peaked?

by Trefis Team
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40.51
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CMCSA
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Comparing the trend in Comcast stock (NASDAQ: CMCSA) over recent months with its trajectory during and after the great recession of 2008, we believe there is very little the stock can potentially gain from its current level of $40 amidst the coronavirus crisis. A detailed comparison of Comcast’s performance against the S&P 500 is available in our interactive dashboard analysis, Any Gain Possible For Comcast Stock Post-Covid?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. Comcast’s stock lost 26% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of coronavirus cases outside China fueled concerns of a global economic slowdown. Notably though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 17% over recent weeks (vs. about 35% gain in the S&P 500) to its current level of $40.

Reason Behind CMCSA Stock Decline

The ongoing crisis and the resulting lockdowns have led to a slowdown in industrial and economic activity, driving up unemployment and partial employment. Lower income has affected consumer spending power, leading to decreased demand for the company’s already low cable-TV offerings. This was confirmed to a certain extent in the Q1 results, where we saw 1% decline in Comcast’s revenues and 40% drop in earnings. Q1 reflected only a partial impact of the crisis, with Q2 expected to factor in the full impact with a sharper drop in revenue and earnings. However, the drop in Comcast’s stock was lower than the broader market due to the expected launch of its streaming platform, Peacock, in July 2020. As the lockdown and home confinement has increased the demand for streaming services, Peacock is a saving grace for Comcast which has helped it outperform the S&P500 during this crisis.

Comcast Witnessed Something Similar In 2008

We see CMCSA stock declined from levels of around $10 in October 2007 (the pre-crisis peak) to roughly $5 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 46% of its value from the S&P’s approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%. However, Comcast recovered strongly post the 2008 crisis to about $7 in early 2010 – rising by 31% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Comcast Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that Comcast stock fell 26% from the market peak on February 19 to the low on March 23 compared to the 46% decline during the 2008 recession, we believe it had a potential to bounce back by about 18% from its March 2020 low to reach about $40, which was already achieved on 29th May 2020. However, with the company also venturing into streaming, we believe that the stock could potentially see a marginal upside as it diversifies into a segment that has seen tremendous growth over recent years. Trefis has a fair price estimate of $41 per share for Comcast’s stock, marginally higher than the current market price of $40. This marks a partial recovery to the $46 level Comcast stock was at before the coronavirus outbreak gained global momentum. Overall, the stock could possibly underperform the market post coronavirus as it has not seen a major decline in the first place, thus limiting the degree of recovery in the stock price.

Our dashboard forecasting U.S. COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus. Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. The complete set of coronavirus impact and timing analyses is available here.

You can see how Covid-19 has affected Comcast’s peer Disney, in our dashboard What Factors Drove 12.9% Change In Walt Disney Stock Between 2017 And Now?

 

See all Trefis Price Estimates and Download Trefis Data here

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