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Comcast Corporation (NASDAQ: CMCSA ) has been MIA during the recent bull move. For the past 12 months, it's gained only about 5%.
Of course, the nagging problem for CMCSA stock has been the relentless trend of "cutting the cord." Actually, here's how the company described it in its latest 10-K filing :
"Distribution platforms for viewing and purchasing content over the Internet have been, and will likely continue to be, developed that further increase the number of competitors that all our businesses face and challenge existing business models. These distribution platforms are driving changes in consumer behavior as consumers seek more control over when, where and how they consume content and access communications services."
So yes, there should be no surprise that investors have been cautious with Comcast stock. For the past three quarters, the company has suffered losses in cable TV customers.
Let's face it, the competition is getting more intense. Leading the charge is Netflix, Inc. (NASDAQ: NFLX ), which has a paid membership base of 110 million (up 35% during the latest quarter).
But there are other tough rivals, such as YouTube from Alphabet Inc (NASDAQ: GOOGL ) and Amazon.com, Inc. (NASDAQ: AMZN ). In the meantime, Facebook, Inc. (NASDAQ: FB ) and Apple Inc. (NASDAQ: AAPL ) have been bolstering their own video platforms.
Oh, and then there is Walt Disney Co (NYSE: DIS ), which is focused on transforming its entertainment business by launching two streaming services. This is all part of an ambitious M&A bet - that is, the $52.4-billion acquisition of the major assets of Twenty-First Century Fox Inc (NASDAQ: FOXA ).
OK then, so what does this all mean for CMCSA stock? Is there a value here? Or should investors stay away?
Well, I actually think CMCSA looks like an interesting investment opportunity right now. First of all, the company has been taking actions to deal with the transition to OTT (over-the-top) services.
For example, there is the X1 platform, which allows for voice-activated searching across live TV, on-demand entertainment and the DVR library. X1 also provides recommendations based on a person's history. There are even apps, such as to track sports scores and stats. Hey, X1 even has a Netflix app!
But Comcast is certainly more than just about cable offerings. Over the years, the company has made significant moves in expanding the footprint of its business. Perhaps the most important is broadband, which continues to grow.
Last year, the service saw a 1.2-million increase in the paid membership base. Interestingly enough, as an indication of the importance of the broadband business, Comcast has indicated it will shell out more than $50 billion over the next five years on the platform.
Next, the company has seen strong uptake with its mobile offering, which is called Xfinity Mobile. This is part of an arrangement with Verizon Communications Inc. (NYSE: VZ ). And since the launch of the service in May, there have already been 380,000 new customers added.
Finally, Comcast has other businesses like NBCUniversal, theme parks and the film studio. Last year, the company generated more than $5 billion in global box office receipts, and its NBC shows led the ratings (for the fourth consecutive season).
In other words, the company has a fairly diverse set of businesses.
Bottom Line on CMCSA Stock
For the most part, the valuation on Comcast stock is reasonable, with the forward price-to-earnings multiple at 14 times earnings. Note that the consensus price target from Wall Street is roughly $49.
Besides, the company is likely to continue to generate robust cash flows, which will be boosted from the changes to the corporate tax law (in the latest quarter, Comcast reported a $12.7-billion benefit). In fact, management recently announced a $5-billion stock buyback and a 21% increase in the dividend.
So even though cord cutting is clearly a risk, it seems to already be baked into the stock price. More importantly, CMCSA has multiple of drivers that can help bolster growth, making the stock look attractive for investors that are seeking a value play.
Tom Taulli is the author of High-Profit IPO Strategies , All About Commodities and All About Short Selling . Follow him on Twitter at @ttaulli . As of this writing, he did not hold a position in any of the aforementioned securities.
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