In the midst of a flurry of earnings activity, the mighty Comcast’s (NASDAQ:CMCSA) June 30 second-quarter fiscal-data release will undoubtedly garner plenty of attention. For some traders, the performance, good or bad, of CMCSA stock will serve as a gauge of Comcast’s ability to compete with streaming beast Netflix (NASDAQ:NFLX).
I’ve heard commentators call streaming a crowded field, and that’s a fair point. It won’t be an easy task for Comcast, big as it is, to steal market share from the likes of Netflix.
As for Comcast shareholders, they really haven’t fared too badly during the economic recovery from the novel coronavirus. On the other hand, a major earnings miss could precipitate a hard landing for the stock price.
As we will discuss, Comcast has had to lighten its pool of human capital, so to speak. But then, Comcast’s introduction of a new and potentially game-changing streaming service could give CMCSA stockholders a very welcome shot in the arm.
A Closer Look at CMCSA Stock
Regarding whether it’s a good value or not, Comcast presents investors with mixed signals. For instance, the share price is closer to its 52-week high of $47.74 than its 52-week low of $31.71. That would indicate that CMCSA stock isn’t necessarily an irresistible bargain.
In contrast, the trailing 12-month price-to-earnings ratio of 17.29x suggests that perhaps CMCSA shares are cheap on a medium-term basis. Besides, a forward annual dividend yield of 2.17% should incentivize income-focused investors to initiate and/or maintain a buy-and-hold position.
With the price of CMCSA stock reaching $43.56 on July 27, the next target for the bulls should be $50. They should remain somewhat cautious, though as there’s a divergence between the price action and the daily trading volume: the price has moved higher over the past few months while the volume has drifted lower.
Plus, the upcoming earnings report could push the share price in either direction. Therefore, the best policy is to slowly accumulate Comcast shares rather than go all in.
The Cuts That Hurt
Back in April, when the world was in full-on crisis mode, Comcast indicated that the impact of the coronavirus on NBCUniversal would be greater during the second quarter than it was in the first quarter.
And thus the warning wasn’t an empty one as Comcast later stated that the job cuts at NBCUniversal will be “sweeping” and “significant.” No specific numbers have been provided yet in regard to the cuts.
This is emblematic of the profound impact of the coronavirus, particularly during the second quarter. It shouldn’t be a huge surprise, then, that analysts are predicting that Comcast’s quarterly earnings per share will total a measly 55 cents.
On a year-over-year basis, that would represent a discomfort-inducing decline of 29.5%. Moreover, the analyst community projects that Comcast’s quarterly revenues will decline 11.6% year-over-year to $23.75 billion.
The Bird Is the Word
These projections are rather pessimistic, and that could set Comcast up for a pleasant earnings surprise. Even beyond that, though, there’s a catalyst in progress that could dwarf the earnings report in long-term significance.
Like the ancient Phoenix rising from the ashes, Comcast’s post-Covid-crash resurrection will likely be facilitated by a new streaming service that should give Netflix a run for its money.
Known as Peacock, NBCUniversal’s (and therefore Comcast’s) streaming platform was given a July launch and no shortage of fanfare. What should scare Netflix the most is that Peacock offers over 13,000 hours of programming with its free tier. Furthermore, the service provides more than 20,000 hours’ worth of programming with its premium tier.
And by “premium,” we’re talking about premium content from, among others, NBC, Universal Kids, Nickelodeon, Showtime, Universal Pictures, DreamWorks, Paramount, Lionsgate and Warner Bros. We’re certainly not talking about a premium price tag since this level of service only costs $9.99 per month.
The Bottom Line
While the impact of the coronavirus was felt during the second quarter, analysts might be overestimating the damage done. This could set CMCSA stock up for a nice price hike post-earnings.
But if you really want to look at the big picture, observe the flight of the Peacock. With so much premium content and both low-cost and free price tiers, Peacock could give Comcast a reason to soar again.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
