Comcast (NASDAQ:CMCSA) is the Rodney Dangerfield of the stock market — it gets no respect.
Few companies generate as much white-hot hatred among the tech elite as the Philadelphia-based company on issues ranging from Net neutrality to customer service. Activists waged an unsuccessful battle against the company’s takeover of NBC Universal, and there was even a website set up called Comcast Must Die.
The company, however, is still very much around. In fact, Comcast is more powerful than ever, thanks to the NBC Universal deal.
But this reflected in Comcast’s share price, which is down almost 4% this year because of Wall Street’s unease about cable in general, and the company in particular.
This makes no sense given that analysts expect revenue in the current quarter to grow almost 50% in the current quarter, and 54% in the quarter after that. Comcast trades at a price-to-earnings ratio of 15.7, among the lowest levels that metric has been in the past five years.
Most analysts rate the shares as buy or outperform. Their average price target is $30.50, above the $20.60 level it’s trading. The stock even pays a dividend that yields 2.1%.
To be clear, Comcast has problems. Its pricing power continues to be under pressure from a plethora of rivals. Moreover, NBC Universal will be a challenge for CEO Bran Roberts to integrate. (A federal judge will retain oversight of the merger to make sure that Comcast is operating in the public interest for the next two year)s.
Investors, though, have continually underestimated Comcast. Remember: rivals that have emerged in recent years, ranging from satellite TV to Hulu, have dinged but not destroyed the company’s business model.
“The cable side of Comcast is operating at a very high level and is out-executing the other U.S. operators at this point,” said Craig Moffett, an analyst with Sanford Bernstein, in an interview with Bloomberg News. He rates Comcast shares outperform.
Yes, the company continues to bleed video customers – it lost 238,000 in the most recent quarter (not great but an improvement) – but it gained 144,000 high-speed Internet and 193,000 voice customers along with 99,000 for the “triple play.”
Overall, it had 49.1 million customers, an increase 2.8%, as of June 30.
Netflix (NASDAQ:NFLX), on the other hand, claims more than 25 million customers, while Dish Network (NASDAQ:DISH), the satellite TV provider, had more than 14 million customers, as of its latest quarter when it lost about 135,000 on a net basis.
NBC Universal, posted solid double-digit revenue gains in the company’s latest quarter, buoyed by increases in advertising and licensing revenue. Those results should continue to be strong as the 2012 U.S. presidential election heats up, and if other advertising spending continues to be robust. Even the company’s theme parks business, which some expected Comcast to unload, did well thanks to the popularity of The Wizarding World of Harry Potter attraction at Universal Orlando.
Comcast even recovered from its foolish decision to part ways with Dick Ebersol, the long-time head of NBC Sports, in May. The New York Times reported that Ebersol would be rejoining the network as a senior adviser. This is good news for shareholders given how important sports — the Olympics and NFL football — is to Comcast.
Jonathan Berr owns no shares of the companies that are listed. Follow him on Twitter @jdberr.
