Can Comcast Monetize Existing Users for Streaming Success?

Key Points

• Comcast Corp stock is up nearly 5% after earnings, but the stock is off its highs. 
• The company’s YOY revenue has been dragged down by a loss of advertising revenue for NBCUniversal. 
• Future growth is likely to come from figuring out how to increase the amount of money it can earn per user.

Comcast Corporation (NASDAQ: CMCSA) stock is up nearly 5% after it reported earnings that beat on both the top and bottom lines. The company posted revenue of $29.85 billion, which exceeded analysts’ estimates of $29.71 billion. The company also posted 96 cents in earnings per share (EPS), which beat the 90-cent EPS forecasts. The company also took an $8.6 billion write-down on its Sky pay-TV operations. 

But there is some caution in those results. The revenue number was down both from the prior quarter and in the same quarter in 2021. A significant reason for that was a year-over-year (YOY) decrease in advertising revenue through the company’s NBCUniversal business. The company cited the lack of a major event, such as the Olympic Games in 2021. Comcast’s chief financial officer (CFO) Michael Cavanagh also says the ad revenue slump may continue into the current quarter. 

MarketBeat reported that Comcast Corp stock was on the verge of a potential breakout, which may be happening right now. CMCSA stock is trying to push pass its 50-day simple moving average (SMA) on decent volume. It crossed over the 10- and 20-day SMAs earlier in October.  

Investors have seen this before in the past year and it hasn’t stopped the stock from falling over 38% in the last 12 months. For this to be a meaningful correction, Comcast will have to show that it can be a viable player, not only in its legacy broadband internet service, but also in its current shift to streaming. 

Comcast: Media and Entertainment Conglomerate 

In addition to its legacy cable and internet service, which continue to perform, the company owns NBCUniversal. This gives it a foothold in a major production studio as well as the Universal theme parks.  

NBCUniversal is also a key element in Comcast’s foray into the streaming sector. NBCUniversal houses Peacock, an ad-supported service that many Comcast broadband customers get as part of a bundled streaming/internet package. The company reported that Peacock now has 15 million paid subscribers, up from 12 million subscribers in the prior quarter.  

Peacock successfully integrates the shows from NBC’s broadcast network (usually on a “streams the next day” basis). It also has its own slate of original content, including the popular "Yellowstone." Consumers can also view movies that are launched by NBCUniversal.  

The Real Work May be Getting Ready to Start  

Analysts forecasted that Comcast will grow revenue at an average pace of slightly over 1% in the next five years but earnings are expected to grow at an average pace of over 9% in the same period.  

Analysts are less concerned and less interested in Comcast’s total addressable market (TAM) for wired or wireless internet. They believe the company will figure out a way to get more revenue from existing customers. If not, then they’ll need to find a way to capture data from customers that it can monetize in other ways, possibly from live sports.

Comcast already has exclusive rights to Sunday Night Football and Notre Dame football, which users can also stream on Peacock. It has deals in place with Major League Baseball and Premier League soccer with more partnerships on the way. This may take on added significance since the company is expecting Disney (NYSE:DIS) to exercise its option to buy Comcast’s share in Hulu on or before early 2024.  

Comcast Still Feels Like a Hold 

Heading into this earnings season, investors were hoping for “better than expected” or “not as bad as feared” results. Instead, they’ve been mostly pleased. Many companies have showed that the earnings recession (which may still happen) is at least another quarter away.  

Comcast has strong fundamentals and pays out a solid (but not spectacular) dividend. It will likely weather whatever the economy throws at it. Should that make investors more encouraged about Comcast?

Maybe. If this recent market rally has legs, CMCSA stock may push higher — but would such a bounce be sustainable? That's trickier to analyze. The stock feels more like a short-term trade than a long-term investment, but there may be a good entry point if that fits your investment style.