Comcast reports after being said to talk down subscriber additions
Media giant, communications services provider and theme park operator Comcast (CMCSA) is scheduled to report results of its third fiscal quarter before the market open on October 28, with a conference call scheduled for 8:30 am ET. What to watch:
1. CABLE AND BROADBAND: With the company's last quarterly report, Comcast chairman and CEO Brian Roberts said the company "delivered excellent results," highlighting the cable segment's performance as "exceptional" given 11% revenue and 15% adjusted EBITDA growth. For Q2, Comcast reported that total customer relationships increased 294,000 to 33.8M. Total broadband customer net additions were 354,000, total video customer net losses were 399,000 and total voice customer net losses were 108,000, with Roberts calling it "the best broadband and total customer relationship net additions on record for a second quarter."
Since then, KeyBanc analyst Brandon Nispel pointed out that Comcast CFO Michael Cavanagh, when talking about Q3 internet net additions at a conference on September 14, stated, "I think we'll trend in line for third quarter net adds with historical averages for third quarter, but we'll be behind the third quarter 2019, which was a record third quarter." The analyst said at the time that he believed this should be viewed as a "modest negative" for Comcast and cable, though he admits that some investors may consider a negative reaction as an opportunity. The consensus Q3 internet net addition estimate was 403,000, and the comments implied Q3 internet net additions for Comcast of around 300,000, Nispel told investors. He has a Sector Weight on Comcast shares.
In a separate research note published on September 24, BWS Financial analyst Hamed Khorsand noted that internet service providers such as Comcast and Altice USA (ATUS) were beginning to report declines in broadband subscribers and raised a concern that a slowdown in subscriber adds could lead to Calix (CALX) seeing a slowdown in spending from small broadband service providers.
On October 1, TD Securities analyst Vince Valentini upgraded Charter (CHTR) to Buy from Hold with an unchanged price target of $870. While he has reduced his estimates and price targets for the two other U.S. cable companies he covers - Altice USA and Comcast - as a result of both companies having talked down internet net adds for both Q3 and the full year at investor conferences, Valentini pointed to Charter as "the only one that did not reduce its subscriber outlook." The analyst, who was impressed with the commentary from management and believes that Q3 results from Charter "will not disappoint," said he viewed the pullback in Charter shares from the stock's recent peak as one that presented an opportunity.
On October 11, Raymond James analyst Frank Louthan downgraded Comcast to Market Perform from Outperform without a price target. Despite greater media and entertainment exposure as a hedge, Louthan believes increasing competitive pressure from telcos expanding their own fiber builds, along with elevated regulatory influence under the imminent reinstatement of Title II, will ultimately limit future subscriber growth from here. The analyst added that as subscriber growth wanes, he thinks it will be difficult for Comcast to attain a market multiple.
2. TV LAUNCHES: On October 7, Comcast's Sky announced the launch of Sky Glass, "dramatically simplifying the way customers watch TV by integrating hardware, software and content." The business unit of the cable giant stated: "For the first time in the UK, you can now get Sky TV over WiFi, with no satellite dish, no box and no fuss," the company said. "The new streaming TV from Sky is available to buy in the UK from 18 October and will launch in Sky's other European markets from 2022."
On October 19, Comcast announced the launch of XClass TV, "extending the reach of the company's global technology platform to smart TVs nationwide." Comcast stated: "For the first time, Comcast's award-winning entertainment and voice platform is available direct to consumers across the U.S., without an Xfinity subscription, both inside and outside of Comcast's service areas. Comcast has partnered with Hisense to bring the first XClass TVs to market, combining Hisense's advanced television hardware with Comcast's XClass TV operating system... The first XClass TVs from Hisense are available this week in select Walmart stores and in the coming weeks through Walmart.com." Other makers of smart TVs and operating systems and services for connected TVs include Vizio (VZIO) and Roku (ROKU).
3. CONSENSUS: In terms of overall results for the third quarter, analysts are calling for Comcast to report total revenue of $29.87B. The consensus Q3 earnings forecast stands at 75c per share, holding steady with what was projected 90 days ago. For the December-end quarter, analysts' consensus currently calls for revenue of $29.84B and for the company to post a profit of 77c per share.
Keywords: earnings, Q3, earnings watch, OTT, streaming, day-and-date release, theme parks, NBC, Peacock, broadband, smart TV