Comcast: Glimmer of Value in a Pricey Market

Shares of media and telecom behemoth Comcast (CMCSA) have felt a bit of selling pressure going into the back end of 2021. The stock enjoyed a modest relief bounce off its 25% peak-to-trough pullback.

Although the latest quarter was a solid bottom-line beat, some discouraging trends emerged. Most notably, the firm’s video-streaming platform Peacock hasn’t been met with as much success as investors had hoped. Add lackluster broadband growth numbers into the equation, and it’s not a mystery why investors turned against the stock.

Despite recent weakness, I remain bullish on Comcast. The stock represents value in a market where value is hard to find.

Comcast’s Peacock Streaming Platform Faces an Uphill Battle

With a wide range of media and tech companies getting in on the streaming action with services of their own, there’s no question that growth in the SVOD (Streaming Video On Demand) space will be harder to come by.

Now, Comcast has some decent content, but it just isn’t finding a spot with consumers, given Peacock’s rivals have either offered amazing, must-see content or a tough-to-match value proposition.

Netflix (NFLX) remains the king of content, both in terms of quality and quantity. Although the price of admissions is among the steepest in the SVOD space, consumers find the subscription worthwhile.

Over time, Netflix will further improve its value proposition with the release of mobile games free of cost to subscribers. For now, though, the main attraction is the content, which people can’t seem to stop talking about. From Squid Game to Queen’s Gambit, it’s hard to compete with the leader in the space.

Tech titan Apple (AAPL) has also been met with mixed success with the launch of its streaming platform Apple TV+. While it has had its fair share of intriguing launches, most notably Ted Lasso, the platform falls short on the quantity front versus the likes of Netflix or almost any other competitor in the SVOD space today.

Still, having Apple TV+ bundled with an Apple One subscription makes for a stellar value proposition for consumers. Indeed, many Apple Music, Arcade, iCloud, News+, and Fitness+ users are getting Apple TV+ thrown in. Such a value proposition is virtually impossible for the likes of Comcast to match.

Indeed, Comcast must invest heavily in content if Peacock is to win over viewers from what is now a plethora of players in the SVOD space. Thus far, it’s been hard, and Comcast hasn’t been as successful as the likes of Disney (DIS) in transitioning from traditional media to the realm of streaming.

Though Peacock experienced remarkable growth numbers sequentially, the platform comprises just a tiny sliver of Comcast’s revenue pie. Such growth is unlikely to be sustained unless significant investments are made. With over $97 billion in debt weighing down the balance sheet and a high 1.01 debt-to-equity ratio, investors should not expect much out of Peacock.

It’ll be hard for Peacock to spread its wings and fly to the same heights as the leaders in the SVOD space. However, it will be interesting to see what kind of jolt the Beijing 2022 Olympic games will give the streaming platform, with streaming slated to begin in February.

Comcast Stock Looks Way Too Cheap

While Peacock is arguably one of Comcast’s more exciting projects, it’s not a reason to pick up shares of CMCSA here. The depressed valuation and growth runway for broadband are significant reasons to get behind the stock after its latest dip.

Comcast stock currently trades at 2x sales and 15.6x trailing earnings. That’s some real value in an otherwise frothy market.

Although broadband growth numbers are slowing, the company does have a stage set for better results moving forward. The firm’s fiber rollout should continue paying major dividends as it continues outmuscling peers in select markets.

Wall Street’s Take

Turning to Wall Street, CMCSA stock comes in as a Moderate Buy. Out of 13 analyst ratings, there are eight Buys, four Holds, and one Sell recommendation.

The average Comcast price target is $59.08, implying 16.4% upside potential. Analyst price targets range from a low of $46.00 per share to a high of $67 per share.

The Bottom Line

Comcast is a classic value stock. Although there’s not much to be excited about on the growth front in 2022, broadband seems poised for a bounce back. Once it does, it could take CMCSA stock higher again.

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Disclosure: Joey Frenette owned shares of Apple and Disney at the time of publication.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >