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Comcast Climbs As Predicted

Posted on Monday, Apr 7th 2008

I said it was time to buy Comcast back in January. At the time, the stock had managed to hit its 52 week low of $16.11, but has since traded up 25%, now at above $20. So what’s going on in the company?

Comcast (CMCSA), the largest American cable operator, announced their Q4 results in February. Q4 consolidated revenues were up 14% over the previous year and met analyst expectations to reach $8 billion. Their earnings increased 33% to $0.20 per share and were higher than market expectations of $0.18.

For the year 2007, consolidated revenues increased 24% to $30.9 billion and adjusted EPS increased 23% to $0.74.

In the quarter, Comcast repurchased $1.25 billion worth of stock – their largest stock repurchase spend in a single quarter.

For the year 2008, Comcast expects revenues and earnings to grow by 8 – 10%.

The fact that 44% of Comcast revenues came from sources other than video, gives color to Comcast’s portfolio. The Triple Play services i.e. voice, data and video, remain their core services but additionally, they are into commercial and advertising as well.

Segment wise, for the quarter, video revenue of $4.4 billion, contributed 56% of their overall revenue. High Speed internet brought in 21% share with $1.6 billion. Phone services contributed 6% share with $0.5 billion. Advertising revenues were 12% lower than previous year revenues with $0.4 billion. Other sources and franchisee fees together contributed $0.5 billion to the quarter. Programming revenues increased by 27% to reach $0.35 billion.

Comcast recorded an impressive 13% OCF growth and an addition of 6 million RGUs in the year. To tackle the softening economic conditions in the market, Comcast is approaching the market with a two pronged approach – price innovation and product innovation.

For successful pricing points, they are offering low price / low speed broadband packages, a high price / high speed option, and other bundled products for consumers to choose from. In product innovations, they are launching their new High Speed Data DOCSIS 3.0 which is wideband and will give speeds as high as 100 megabits to users. With investments in a new all IP network, Comcast will be able to build up on their interactive and targeted advertising revenues as well.

I had mentioned earlier, how the company needs to deepen its entertainment portfolio. With investments being made in a new architecture that will help them put over 6,000 movies available on demand to users with more than 3,000 of them in high definition format, and plans to enter into tie-ups with content providers, they seem to be addressing that shortfall.

What is still missing, is their focus in acquisitions. To become a successful Interactive Media Company, a Web 3.0 company, they need to make a few serious acquisitions in some of the major Web segments such as travel and Shopping.

As of now, they don’t seem to be doing that.

1 yr comcast chart

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Glad Comcast is broadening product offering to accommodate different price points..I had noted that point while commenting on previous article on the same topic

Balaji Ganesan Tuesday, April 8, 2008 at 12:16 AM PT