Rising 15% Over The Last Year, Will Comcast Stock See Gains Following Q4 Results?

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Comcast (NASDAQ:CMCSA)  is expected to report its Q4 2023 results around January 25. We expect Comcast’s earnings to come in at $0.80 per share, marginally ahead of consensus estimates of $0.79 per share. We project that revenue will stand at about $30.60 billion, roughly in line with consensus estimates and flat versus last year. So what are some of the key trends that are likely to drive the company’s earnings? See our interactive dashboard analysis on Comcast Earnings Preview for more details on how Comcast’s revenues and earnings are likely to trend for the quarter.

Amid the current financial backdrop, CMCSA stock has seen little change, moving slightly from levels of $50 in early January 2021 to around $45 now, vs. an increase of about 25% for the S&P 500 over this roughly 3-year period. Overall, the performance of CMCSA stock with respect to the index has been lackluster. Returns for the stock were -4% in 2021, -31% in 2022, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that CMCSA underperformed the S&P in 2021 and 2022.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Communication Services sector including GOOG, META, and NFLX, and even for the megacap stars TSLA, MSFT, and AMZN.

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In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could CMCSA face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Comcast’s bread-and-butter broadband Internet business has seen a lackluster performance in recent quarters. For example, over Q3 2023, Comcast lost about 18,000 broadband customers.  The slowdown comes as the boom witnessed through the Covid-19 pandemic and the remote working and learning trend has eased.  Moreover, competition has been mounting from fixed wireless broadband players, who offer more flexibility and affordable rates. However, the company has been able to raise average pricing and this has helped overall revenue growth for the broadband business. Comcast’s cable TV business is also faring poorly, as the secular trend of cord-cutting continues. Over the last quarter, the company lost 490,000 video subscribers and we expect to see a similar trend over the holiday quarter as well. The company’s fledgling wireless services operations – which operate on the Verizon network and use the Xfinity brand name – are likely to remain a bright spot for the company. Over Q3, the division saw wireless subscriber numbers rise 294,000 to 6.3 million. The company’s content & experiences segment could benefit from continued strength in theme parks although this could be offset by some softness in the advertising market.

At the current market price of roughly $44 per share, Comcast trades at just about 10x consensus 2024 earnings. Although there remain near-term headwinds for the stock, Comcast has the potential to expand its earnings per share driven by share repurchases and margin expansion for the cable communication business via cost and efficiency improvements. We value Comcast stock at about $48 per share, about 8% ahead of the market price. See our analysis of Comcast Valuation for a closer look at what’s driving our price estimate for the company and how Comcast compares with its peers. Also, see our analysis of Comcast Revenue for more details on the company’s key revenue streams and how they have been trending.

 Returns Jan 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 CMCSA Return 0% 0% -37%
 S&P 500 Return -2% -2% 110%
 Trefis Reinforced Value Portfolio -2% -2% 593%

[1] Month-to-date and year-to-date as of 1/9/2024
[2] Cumulative total returns since the end of 2016

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