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Comcast Stock Down from Record High as Q2 Earnings Loom

Will Comcast continue its year-long streak of beating earnings estimates?

Comcast (NASDAQ:CMCSA) reports its second quarter of 2019 earnings next week, and investors seem uncertain about whether CMCSA stock is a buy. After climbing as high as $45.20 on Tuesday (an all-time high), Comcast stock lost ground on Wednesday. Then, shares closed up 0.29% on Thursday.

The bull and bear case for buying Comcast stock before Q2 earnings
Source: Shutterstock

The uncertainty is tied to the Comcast earnings call on July 25. Will CMCSA beat expectations? The company has been doing just that in recent quarters, at least in terms of earnings.

Investors will also be looking for big numbers on new high-speed internet customers. This will help offset continued bleeding of video subscribers. Further, prospective buyers will seek news on NBCUniversal’s planned video streaming service.

What Investors Are Looking for in Comcast Earnings

When Comcast reported its Q1 earnings in April, the company massively beat per-share profitability expectations. The company also added 375,000 high-speed internet customers but lost 121,000 video customers. However, revenue of $26.6 billion (up 17.9% year-over-year) was lower than analysts had expected.

The news initially negatively impacted Comcast stock, but it ended up closing on a high note. For Q2, investors will carefully watch developments on multiple fronts.

Analysts are bullish on CMCSA’s profitability prospects, with a consensus earnings-per-share forecast of 75 cents. That’s a 15.4% increase over the 65 cents the company reported a year ago.

Moreover, analysts will place video-customer numbers under a microscope. Comcast has been bleeding video customers — a trend that continued last quarter. While adding high-speed internet customers (something else analysts will be watching closely) helps to offset that loss, the company takes a revenue hit because the loss of video customers comes with an accompanying loss in pay-TV subscribers.

CMCSA’s NBCUniversal division saw its revenue drop 12.5% last quarter, adding to the overall revenue miss for Comcast. Any news on NBCUniversal’s forthcoming video-streaming service, expected to launch in Q1 2020 will be of particular interest.

NBCUniversal recently paid $500 million for rights to The Office. Unfortunately Netflix (NASDAQ:NFLX), the show will be pulled from the streaming giant in 2021. However, it’s expected to be a key draw for gaining subscribers for Comcast, boosting prospects for CMCSA stock.

Rival media giant AT&T (NYSE:T) also has big video streaming plans for next spring, including a new WarnerMedia service that just won the rights to Friends. The competition in streaming video is set to explode, starting this fall with high-profile services from Apple (NASAQ:AAPL) and Disney (NYSE:DIS). Therefore, any mention of NBCUniversal’s plans during the earnings call could have an impact on Comcast stock.

Comcast Stock on an Earnings Winning Streak

Comcast earnings are on a year-long streak in terms of beating analyst expectations. Going back to last July, the consensus EPS forecast was for 61 cents per share, while CMCSA reported 65 cents. That trend continued unbroken and last quarter, Comcast really hit it out of the park. The media giant delivered EPS of 76 cents compared to the consensus target of 66 cents.

That performance helped Comcast stock to recover after it spent the first half of 2018 in a protracted slump. At that time, investors worried about cord cutters dropping their cable subscriptions.

Since the streak started with last July’s Q4 2018 earnings report, Comcast has steadily risen from $34.84 to $45.20 for nearly 30% growth. That set a new all-time high for CMCSA stock in the process. In comparison, AT&T has chalked up growth of just over 6% during the same period. Also, the Nasdaq Composite gained only 4.7%.

What Will Happen Next Week?

July 25 will be a big day for Comcast. Another earnings beat is a strong possibility and big numbers there could boost CMCSA stock further.

But with Comcast stock setting new all-time highs earlier this week, investors will be cautious. Surely, they’ll be on the lookout for any sign of future trouble.

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

Article printed from InvestorPlace Media,

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