Yahoo Finance Does Comcast Stock Offer Long-Term Investors Value Right Now?
Investing and saving go hand in hand when it comes to building wealth. Oftentimes it is not how much money you make, but how much you can save.
Comcast's CMCSA Xfinity Mobile plan recently caught my attention as an option for consumers to save some money, and for investors to possibly find long-term value in Comcast stock.
The growth of Xfinity mobile should boost revenue and bode well for Comcast stock. Xfinity Mobile offers unlimited data starting at $45 a month and has been a big push from the company as linear TV fades.
Wireless communications is a bright spot for Comcast as competition from other video streaming services is one of the main factors that's driven the stock down roughly 40% in the past 12 months.
Analysts appeared worried about Comcast’s sputtering broadband growth. Comcast failed to gain any Broadband subscribers during the quarter for the first time ever.
Total broadband customers were 32.2 million in Q2, which was flat compared to the first quarter of 2022. Analysts had been expecting the company to add an additional 82,000 broadband subscribers. This also marked a dramatic downturn from the 354,000 broadband subscribers added during Q2 2021.
The inability to grow its broadband segment led the stock to fall 9% after second quarter earnings were released on July 28.
On the surface this appears disastrous, however broadband revenue was actually up 6.8% at $6.1 billion compared to $5.7 billion from Q2 2021. Year to date, broadband revenue was up 7.4% and total cable communications revenue jumped 4.2% to $33.1 billion.
The revenue increase is largely attributed to the success of the company's wireless segment, Xfinity Mobile. CMCSA also reported an earnings beat of 11%, with Q2 EPS at $1.01 per share.
Xfinity Mobile reached profitability for the first time during the third quarter 2021, after launching in 2017. Wireless revenue growth has continued, with the segment up in Q2 to $722 million.
Year-to-date wireless growth is up 31%, the largest increase in any of Comcast's cable communications businesses. Meanwhile, wireless penetration of residential broadband customers increased to 7.9%.
The strength of its wireless unit should help offset continued setbacks in its video segment. Video revenue decreased 2.4%, reflecting a decrease in the number of residential video customers.
Bottom Line
With Comcast still hovering near 52-week lows, much of the risk in the stock may already be priced in. CMCSA has a forward P/E ratio of 10.6X and the E (earnings) is expected to grow. This is well below the five-year high of 20X earnings and near the median of 13.9X.
The Zacks Consensus Estimate for 2023 annual EPS is $4.02 a share compared to $3.63 in 2022, implying growth of 10%. Comcast is also projected to post earnings growth of over 12% in 2022. These growth outlooks help show that the low P/E ratio does point to the stock being somewhat undervalued.
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Comcast’s 2.80% dividend yield is also a nice source of income that might help put CMCSA on investors' radars. And its Cable Television industry is in the top 26% of over 250 Zacks industries.
Cable/Streaming companies tend to have high debt, but Comcast has been able to pay down some of its debt in the last year. On top of that, of the 25 price targets we have for the stock the average is $49.82 a share, suggesting upside of 30% from its current levels.
CMCSA currently land a Zacks Rank # 3 (Hold), alongside an overall “A” VGM grade.
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