Why Comcast shares fell 15.1% in April
Shares of Comcast (NASDAQ: CMCSA) fell 15.1% in April, according to S&P Global Market Intelligence. The media and cable conglomerate announced its first-quarter earnings, which beat expectations, but investors still decided to sell the stock towards the end of the month. Compared to the S&P500which was down 8.8% in April, Comcast trailed the index 6.3% over the period.
Comcast is an entertainment and telecommunications conglomerate with a market capitalization of $179 billion. He owns a broadband internet/cable business, NBC Universal, Sky Entertainment and many other assets.
On April 28, the company announced its results for the first three months of 2022. Revenue of $31 billion, up 14% year-over-year, beat analysts’ expectations of 30.5 billions of dollars in the report. Adjusted earnings per share (PES) reached $0.86, up 13% year-over-year. This number also exceeded analysts’ expectations.
So why did Comcast’s stock tumble as its financials beat Wall Street expectations? I think there are two reasons. First, broadband Internet customer additions were 262,000 for the quarter, or 180,000 excluding free subscribers. The nominal number exceeded Wall Street expectations for 229,000 additions, but the adjusted number was much lower. That may worry investors about potential growth in broadband internet customers over the next few quarters, a key part of Comcast’s business. For reference, three of the major broadband Internet companies, Comcast, Charter Communicationsand United Statesare down more than 20% this year.
Second, Comcast’s streaming video ambitions aren’t growing quickly. Peacock Subscribers (its main streaming asset) added just 4 million paid subscribers in the quarter, bringing its total to 13 million. That’s way less than major streaming companies like netflix, disneyand HBO.
Towards the end of the month, Comcast announced a partnership with Charter to make its Xfinity Flex streaming hardware available to subscribers of both companies. I don’t think it had much of an effect on the stock price, but it does show the dynamic environment in which internet/media companies are operating right now. Comcast is right in the middle of all this chaos.
With the stock down, Comcast is trading at a price-to-operating earnings (P/O) ratio of 8.4. If you add back its $100 billion in debt and subtract its cash, the stock has an enterprise value (EV) of $273 billion, giving it enterprise value to operating income ( EV/OI) of 12.7. Both of these numbers are cheap relative to the market average and could be a buying opportunity if you believe in the long-term sustainability of Comcast’s internet and media business.
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Brett Schaefer has no position in the stocks mentioned. The Motley Fool holds positions and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast and recommends the following options: January 2024 Long Calls at $145 on Walt Disney and January 2024 Short Calls at $155 on Walt Disney. The Motley Fool has a disclosure policy.
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