How Is Comcast Positioned Compared To Its Rivals?

The shares of Comcast (NASDAQ: CMCSA) currently trade at $57 per share, which is 33% above its pre-Covid level. On the other hand, shares of ViacomCBS (NASDAQ: VIAC) are trading at $40 per share, which is 18% above its pre-Covid level. Does that make VIAC a better stock pick compared to CMCSA? Both companies belong to the media industry and are also new entrants into the streaming war. Comcast is a much bigger company, with its market cap 10x that of ViacomCBS and revenues being 4x that of ViacomCBS. With better revenue and earnings growth, Comcast enjoys a higher valuation (P/S) multiple. Comcast is better placed for further rise considering its larger streaming subscriber base, less exposure to pandemic sensitive verticals like theme parks, and new business deals (eg: one with WWE). We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis, Comcast vs ViacomCBS: Industry Peers; Which Stock Is A Better Bet?

Revenue Growth

• Comcast revenues have demonstrated better growth compared to ViacomCBS over recent years, with Comcast revenue expanding 7.8% in the last three years. ViacomCBS revenues increased only 0.9% during this period. Healthy growth exhibited by Comcast was driven by rising ad spend, sharp growth in broadband revenue during the pandemic as the number of people suddenly working from home surged, and foray into streaming which has seen a continuous expansion in the subscriber base. ViacomCBS revenues saw very low growth as its studio business was severely affected by the pandemic induced lockdowns.
• Comcast earns revenues from three segments – more than 50% comes from cable communication (high-speed internet, voice services).  Another 30% comes from NBC Universal (cable networks, broadcast television, theme parks) and balance 20% is from 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).
• ViacomCBS generates revenues from cable networks, TV entertainment, and studio business.

Returns (Profits)

• Comcast profit margins have been historically higher than ViacomCBS’. Though both the companies have seen a decline in profitability over the last three years, the drop in Comcast’s margins has been lower.
• Comcast’s LTM operating margin is 20% as against ViacomCBS’ 18%.
• VIAC’s margins are affected by the costs of the merger between CBS and Viacom as well as its studio business being affected during the pandemic. (related: Check out our theme on Value Tech Stocks)

Risk

• With respect to financial leverage, also, Comcast is in a much better position. Its debt as a percentage of equity stands at 38%, which is much lower compared to 67% in the case of ViacomCBS.
• Only as far as cash position is concerned, ViacomCBS is better placed with cash to assets standing at 9.7%, compared to Comcast’s 4.5%.

Net of it all

Though VIAC has a better cash position, overall Comcast has exhibited much better revenue and profit margin growth, along with lower leverage. For this, the company has been rewarded, which is reflected in the market return (last three years) for CMCSA stock which stood at 58%, as against -29% for VIAC stock. Comcast is likely to showcase better top and bottom line growth in the coming quarters compared to ViacomCBS. As at the end of Q2 2021, Peacock had 54 million signups. The signups indicate a huge jump from 42 million at the end of Q1 2021, which could be partially due to the streamer allowing content to show on Amazon Fire TV. Also, with Peacock streaming some big-ticket items like “The Office” and signing an exclusive agreement with WWE Network to stream wrestling, the subscriber count is expected to only grow in the coming months. Along with continued strong demand for streaming, with the lifting of lockdowns and expansion of vaccine coverage, Comcast’s traditional businesses, like cable and theme parks, are also expected to see recovery in the coming quarters.

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates