Strong Comcast Corporation (CMCSA) Earnings Results Leave a Mixed Impression

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If any company needed a positive earnings result, it would be Comcast Corporation (NASDAQ:CMCSA). Long facing questions over a dramatically changing media environment and eyebrow-raising decisions, CMCSA stock is having a poor 2018. Prior to its first-quarter earnings report, shares were down nearly 17% for the year.

Strong Comcast Corporation (CMCSA) Earnings Results Leave a Mixed Impression

Compounding matters was that investors seemingly lost patience with the media giant. Just 24 hours ahead of its release, Comcast stock shed 1.5%. Of little consolation to the company was that its rivals also experienced volatility recently. For instance, Netflix, Inc. (NASDAQ:NFLX) dropped nearly 9% since the April 17 session. Then again, NFLX is up 56.5% for the year.

It’s been that kind of ride for CMCSA in 2018. The company has few positives to lever, outside of advantaging its massive resources through aggressive acquisitions. But, when next-generation media competitors like Netflix experience softness, so too does Comcast.

One of my biggest concerns for CMCSA stock is that the underlying organization has become the General Electric Company (NYSE:GE) just prior to its severe decline. In other words, Comcast has become too big and unwieldy for its own good. Worse yet, management wants to become even more unwieldy. Its very questionable bidding for Sky Plc (OTCMKTS:SKYAY) proves the point.

Moreover, I believe Comcast stock recently suffered due to its increasing irrelevancy. Take a good look at popular YouTube channels. Everyday stars typically have way more followers than traditional media outlets’ YouTube accounts.

It’s comical to me that some amateur broadcasters enjoy greater engagement and views on social media than the Comcast-owned NBC Sports will experience on its official platforms.

This is something that CMCSA must address. Unfortunately, its recent earnings report left more questions than answers.

CMCSA Earnings Both Exceeded and Succumbed to Expectations

For Q1, Comcast’s earnings per share hit 62 cents. This was well above consensus forecast, which pegged EPS at 59 cents. Worth noting is that consensus fell right in the middle of the estimate spectrum, which ranged from 57 cents-61 cents. Against the year-ago quarter, earnings increased a robust 17%.

On the revenue front, Comcast rang up just under $22.8 billion. This was slightly above Wall Street’s consensus estimate of $22.74 billion. Analysts anticipated revenue to land somewhere between $21.6 billion-$23.2 billion.

Traditional media platforms delivered much of the positive earnings and sales results. Thanks to coverage for the Super Bowl and the Winter Olympics, CMCSA scored big. CEO Brian Roberts stated the following:

The Olympics were an incredible event that showcased our capabilities and collaboration throughout the company. NBCUniversal’s amazing presentation was the most comprehensive in Winter Games history with over 2,400 hours of coverage across broadcast, cable networks, and digital.

I don’t disagree with Roberts. In my opinion, the Winter Games generated immense excitement. Unfortunately, that’s not translating to enthusiasm in CMCSA stock. At one point in pre-market trading, shares fell 2%.

Why the disconnect? Primarily, it’s the disconnect itself. Although CMCSA brought in 379,000 new high-speed internet subscribers, which is an 8.3% increase against the previous quarter, it’s nearly a 12% drop from the year-ago quarter. Customers are finding alternatives in other competitors or other platforms.

Next, my GE analogy wasn’t just a light-hearted attempt at humor. Comcast recently formalized its $31 billion bid for Sky. In addition, the company announced earlier this month that it’s moving into healthcare.

Rather than streamlining operations, Comcast prefers to lose weight by eating more. I’m not sure how this will work, and I’m not the only one inquiring.

Longer-Term Picture Murky for Comcast stock

Moving forward, my most pressing concern for Comcast stock is technical stability. It’s not just the fact that shares are severely underperforming on a year-to-date basis, either.

When the company peaked in the markets back in January, CMCSA stock trended inside a clear bullish channel. With its recent sharp declines, the entire channel was broken. Not only that, it appears that a bearish trend has developed.

But, on a longer-term scale, I’m worried about how Comcast intends to make itself relevant again. Last year in late October, I discussed the developing headwinds against subscription-based media services. Each generation has steadily cut the cord. When the next wave of young adults enters the workforce, CMCSA risks obsolescence. I wrote:

Gen-Z, the oldest of whom are entering their first-year of college, have virtually no recollection of traditional media. They grew up during the advent of the digital age. When this demo first enters the workforce, they absolutely will not consider antiquated, subscription-based broadcasts. That’s the real bad news for Comcast stock.

Did we see enough from the Q1 earnings report to justify a risky purchase? I’m afraid not. Although some positives exist, it’s still the same old CMCSA stock attempting to appear relevant.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/strong-cmcsa-earnings-result-leaves-mixed-impression/.

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