3 Reasons Comcast Stock Can Still Surge Another 20%

CMCSA stock can rise significantly soon if it can push through resistance

By Bret Kenwell, InvestorPlace Contributor

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Comcast Stock Has Become Wall Street’s Quicksand

Source: Mike Mozart via Flickr

Comcast (NASDAQ:CMCSA) stock can still make a blistering move to the upside. Now that there’s some clarity around the mergers and acquisition (M&A) situation with Twenty-First Century Fox (NASDAQ:FOX, NASDAQ:FOXA), investors have a better idea about Comcast’s future and the outlook of CMCSA stock.

Let’s see why CMCSA stock can still head higher, starting with a closer look at the company’s M&A activity.

The Sky Is the Limit for CMCSA Stock

So what’s happening with the M&A situation? After an escalating bidding war between Comcast and Walt Disney Co (NYSE:DIS) for Fox’s assets, the former company finally bowed out last month.

That paved the way for Disney to buy most of Fox, giving it a plethora of content and allowing it to mesh together key franchises. It also gives Disney a controlling 60% interest in Hulu and should allow it to better position itself in the streaming race, which is currently led by Netflix (NASDAQ:NFLX).

Disney definitely emerges from the deal as a winner, but that doesn’t make Comcast the default loser. Comcast caused Disney to pay a nearly $20 billion premium to the initial deal it agreed to with Fox. Furthermore, Comcast will now likely acquire a majority stake in Sky, the U.K.-based broadcasting company that is partially owned by Fox. The latter company was making an active effort to acquire the rest of Sky that it didn’t already own.

If Fox had acquired a majority stake in Sky, Disney probably would have acquired all of Sky, which Disney CEO Bob Iger has called a “crown jewel.” It’s possible Disney will still go after Sky, but the path is paved for Comcast to pursue the asset. An acquisition of Sky by Comcast will be good for CMCSA stock and the cable conglomerate’s operations.

Valuing CMCSA Stock

Potential M&A isn’t the only driver for Comcast, though, especially since it’s the buyer rather than the target. Another reason to be bullish about Comcast is its growth outlook/valuation.

CMCSA stock trades at a price-earnings ratio of less than 14. That would be expensive if its earnings were poised to decline or stagnate this year. But Comcast is expected to grow its earnings almost 23% in 2018 and another 10.3% in 2019. Its revenue outlook is less impressive, but estimates still call for its top line to increase a reasonable 6% this year and about 2% next year.

Don’t forget: Comcast stock also pays a 2.2% dividend yield, which increased nearly 20% in January. A low valuation, double-digit earnings growth for the next two years, and a 2.2% yield are pretty attractive in my book.

Trading CMCSA Stock

chart of CMCSA stock

The final reason to like Comcast stock is its chart.

The shares put in a double bottom near $31 in May and June. CMCSA stock was subsequently able to push through the 50-day and 100-day moving averages and overcome resistance near $34. As long as Comcast stock stays above $34 and its uptrend support, which is depicted by the blue line, the shares look good.

If Comcast can push through the 200-day moving average near $35.60, it could really gain momentum.

If CMCSA can surpass that resistance level, it opens up a return to the $40-$42 area, which is depicted by the dashed line. Ironically, the average analyst price target over the last three months sits at just under $42. That’s about 20% upside from current levels.

Given M&A, current growth, valuation, and the charts, CMCSA stock could be primed for a solid run.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/08/3-reasons-buy-cmcsa-stock/.

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