Is Comcast Stock a Buy?

Comcast (CMCSA 0.93% ) is the latest company to enter the streaming market. It is now competing with the likes of netflix and disney as its recently launched Peacock service seeks to gain market share.

However, investors should also remember that Comcast is a telecommunications stock as much as a media stock It owns the infrastructure that provides Internet and television services to millions of customers. It also controls Sky, which serves 24 million customers in seven European countries.

These telecommunications services have generated the bulk of the company’s revenue, and demand is expected to remain robust for Internet services and content. Still, even if Peacock is successful, the fallout from the cord-cutting could still affect Comcast’s stock for a long time.

The problem with Comcast and its peers

At first glance, Comcast may look like a smaller version of Disney. Through NBCUniversal, it owns content from NBC and Universal as well as Universal’s theme parks. Additionally, with consumers cutting the cable TV cord, the company had to bolster its Internet and streaming offerings to retain its customer base.

He had some success with Peacock, which is customer registration faster than his peers.

Peacock also boosted Comcast stock after the third quarter earnings report. Comcast said 22 million customers have now signed up for its Peacock streaming service, more than double the 10 million that signed up the previous quarter. This is impressive growth considering the service launched nationwide in July.

Image source: Getty Images.

However, investors face a fundamental problem. Despite all the hype around streaming, it probably won’t replace the Loss of income cable television. Peacock’s most expensive plan costs $9.99 per month. The average cable plan, which typically includes internet service and a landline, costs more than $217 per month, according to DecisionData.org.

Comcast charges between $30 and $80 per month for internet plans without a contract. Its plans that bundle internet, a landline and cable TV without premium channels cost up to $160 a month after the regular rate is applied.

If a customer switches from flat rate to Internet service and Peacock only, it means a significant loss of revenue for Comcast. The cord-cutting trend probably makes these losses unavoidable.

Yet there is no denying the permanent loss of a lucrative revenue stream. For this reason, Comcast could remain a stagnant or slow-growing stock at best.

Comcast Stock and Finances

However, one of the few benefits of cord cutting is that it can make Comcast appear like a bargain. The stock trades at a forward price-to-earnings (P/E) ratio of around 14, well below the valuation of Netflix or Disney. Its annual dividend of $0.92 per share yields around 2.1%, slightly above the S&P500 averages.

Yet COVID-19 continues to weigh on its finances. In the last quarter, revenues fell 5% compared to the same quarter last year. This led to adjusted earnings per share of $0.65, 18% lower than a year ago.

The company saw double-digit increases for its high-speed internet, wireless offerings and ad revenue. However, COVID-19 has hammered the company’s NBCUniversal segment. Revenue fell nearly 19% year-over-year, with theme park revenue down 81% and filmed entertainment grossing 25% less than a year ago.

Where Comcast Goes From Here

Inevitably, studios will resume production, and investors can expect patrons to return to theme parks once the pandemic subsides. Additionally, broadband internet, streaming and wireless will remain areas of growth for the company, as will Peacock. Unfortunately, that success likely won’t make up for the decline in its highly profitable cable television business.

Telecom services should ensure Comcast’s survival. Maybe he’ll even find some success with theme parks and content development.

Yet survival does not necessarily mean prosperity. If customers want low-cost inventory that will stay stable and produce modest cash flow, Comcast’s inventory will serve them well. However, investors who want higher growth should probably look elsewhere.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

About Cecil Cobb

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