Is Comcast Stock A Buy At $32?

Comcast (NASDAQ:CMCSA) stock has had a tough year, declining by close to 38% since early January. While the broader markets have taken a beating due to rising interest rates, Comcast’s bread and butter broadband business has faced considerable pressure in recent months, as the boom witnessed through the Covid-19 pandemic and the work-from-home trend have cooled off. Moreover, competition for fixed-wireless broadband services from wireless carriers has been mounting, hurting the company. Over Q3, the most recently reported quarter, Comcast added just about 14,000 customers, down from 300,000 additions in Q3 2021. In comparison, T-Mobile added over 500,000 home internet customers in Q3 2022. The performance of Comcast’s media business has also been a bit of a mixed bag. Sales declined over Q3 due to a tough comparison with last year, when Comcast covered the Tokyo Olympics. Moreover, with the U.S. economy remaining on a weak footing and inflation remaining stubbornly high, it’s likely that advertising spending will remain under some pressure. Comcast’s cable TV business has also been on the decline, with the company losing 561,000 subscribers over Q3, as the secular trend of cord-cutting continues.

However, we think Comcast stock remains undervalued. At the current market price of roughly $32 per share, Comcast trades at about 9x consensus 2022 earnings. Although there are near-term headwinds for the stock, Comcast is likely to expand its earnings per share driven by share repurchases and margin expansion for the cable communication business via cost and efficiency improvements.  Moreover, the company’s sizable and stable cash flows could make it a safe haven of sorts in a recessionary environment. Investors also probably shouldn’t worry too much about the company’s current loss of market share to wireless broadband providers, given that wireless capacity is more limited compared to Comcast’s wireline broadband. We value Comcast stock at about $46 per share, which is 45% ahead of the current market price. See our analysis of Comcast Valuation for a closer look at what’s driving our price estimate for the company and how Comcast compares with its peers. Also, see our analysis of Comcast Revenue for more details on the company’s key revenue streams and how they have been trending.

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