If you want a candidate for surprise picks of the year, Comcast (NASDAQ:CMCSA) surely deserves consideration. As a traditional media and TV services provider, the company obviously faces risk from the cord-cutting phenomenon. Simply put, people, especially younger people, don’t consume content entertainment like they used to. Nevertheless, the Comcast stock price is up a whopping 40%.
What makes the rally in CMCSA stock even more surprising is that so many other blue chips have under-performed. Clearly, the uncertainties surrounding the U.S.-China trade war has negatively impacted the markets. And while Comcast isn’t the most cited name among trade-war affected organizations, if we don’t have a resolution, this would hurt our economy.
Logically, then, a poor economy would crimp consumer sentiment. Of course, that does have a dramatic impact on the Comcast stock price. This is especially true considering that the underlying company is basically attempting to convert customers to higher-priced TV subscriptions.
Therefore, some investors have doubts about CMCSA stock regardless of its recent performance. But recently, Oppenheimer upgraded its assessment of the company to “outperform” from “perform.” Due to the broader concerns about traditional media, it was one of the biggest analyst calls of last week. Still, reading into some of the reasoning, the upgrade makes sense, at least on paper.
Primarily, Oppenheimer analysts are bullish on the upcoming 2020 Summer Olympics and the presidential election. Both are sure to generate a spike in TV and streaming viewership, creating advertisement-based revenue opportunities. Popular franchises, such as “Minions” and “Fast and Furious,” also support the growth narrative for Comcast stock.
But should you jump in? I’ve got reservations and here’s why:
High-Profile Events May Not Pan Out for Comcast Stock
Before seemingly every Olympics, there are huge debates about cost. According to some estimates, the 2020 Summer Games in Japan may be the second-most expensive in history. Considering Japan’s largely questionable economy, it’s a cause for concern.
But for CMCSA stock, banking on those games providing ad revenues is also fraught with risk. For reasons that are not particularly shocking, interest in major athletic competitions is waning.
We only need to look back at the last Olympics in 2018, which was the winter edition. With PyeongChang, South Korea as hosts, it produced the least-watched Olympics on record. While it’s not fair to make too many direct comparisons between the winter and summer tournaments, I’m not confident that the Tokyo Games will produce a better result for Comcast stock.
The biggest reason I say this is due to the time difference. Currently, Tokyo is 13 hours ahead of New York City. It’s 16 hours ahead of Los Angeles. Call it what you want, this is just not a favorable time slot for most Americans.
Now it’s true that Comcast’s NBC broadcasts major events, such as the opening and closing ceremonies, on tape delay. But many viewers like to watch live-streamed events. However, with such a time discrepancy, there are increased chances for spoilers. Thus, if you already know what’s going to happen, no point exists in watching. This in turn could hurt the Comcast stock price.
Plus, sports viewership is declining across the board. When you have the NFL absorbing double-digit viewership losses year-over-year, it poses problems for CMCSA stock. While Comcast could very well achieve its projected growth, it’s probably not going to do so via the Olympics.
Does CMCSA Stock Have a Trump Card?
That leaves the 2020 presidential election and Comcast’s film franchises to pick up the slack. First, the former factor: I believe media as a whole will benefit tremendously from the election cycle. How could it not? The last cycle was a surreal experience, breathing new life to the political machinery.
But will this actually benefit Comcast stock? As with the Olympics, I’m not too sure. In 2016, the real winners were CNN and Fox News: the latter because Trump called the organization “fake news,” and the former because it’s the only conservative mainstream news channel.
While Comcast can get a piece of the pie, it’s the smaller, less tasty piece.
Finally, I must say Comcast’s film franchises do provide some hope. For example, “Hobbs & Shaw,” a spin-off of the popular “Fast and Furious” franchise, has surprisingly broken many records. Let’s give credit where it’s due.
That said, Comcast faces fierce content competition from the likes of Disney (NYSE:DIS), which owns the “Star Wars” franchise. As a result, I’m going to take a breather on Comcast stock. Yes, some interesting elements exist, but they’re not quite compelling enough.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.