Is Comcast an Attractive Investment?

With shares of Comcast (NASDAQ:CMCSA) trading around $51, is CMCSA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Comcast is a provider of entertainment, information, and communications products and services. The company operates in five segments: cable communications, cable networks, broadcast television, filmed entertainment, and theme parks. Comcast offers television, video, high-speed Internet, and voice services to residential and business customers. It also operates NBC and Telemundo broadcast networks; provides filmed entertainment under the Universal Pictures, Focus Features, and Illumination names; and operates theme parks, studios, and a dining, retail, and entertainment complex.

A new challenger enters — or any phrase along those lines — would likely ring in the ears of gamers anywhere upon hearing that Comcast has plans to get a competitive place in the gaming universe by partnering with another big name, Electronic Arts (NASDAQ:EA), according to an exclusive Reuters report. The idea is to offer all the living room fun of a console with a lot more ease and what may feel like a lot less expense, but the reality might not be as planned. According to the report, inside sources informed Reuters that Comcast was making arrangements with EA to stream certain video games through its X1 cable box — and yes, that is one word and a small shift away from sounding a lot like Xbox One, but it’s a long way away from being like one.

It wouldn’t be the first company to pull a trick like this in the living room, but it’s doing it in a less common way, and with competitors nipping at it from all around, it had little choice. The system would function by using cloud-gaming, since the X1 cable box is by no means a gaming machine with all the processing powers or GPU performance necessary to handle crunching modern game data, though it is powerful as far as cable  boxes go, offering more in the way of apps and functionality, according to Reuters‘ sources. Cloud-gaming does all the processing in servers elsewhere, then streams the visuals and audio back to a screen for the player to see and respond to — it’s essentially like having a controller and screen that are wirelessly connected to a gaming console that is very far away from the living room.

T = Technicals on the Stock Chart Are Mixed

Comcast stock has been moving higher in recent times. However, the stock is currently trading sideways and may need time to stabilize before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Comcast is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Comcast options may help determine if investors are bullish, neutral, or bearish.

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Comcast’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Comcast look like and more importantly, how did the markets like these numbers?

Comcast has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Comcast’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Comcast stock done relative to its peers, Time Warner Cable (NYSE:TWC), DirecTV (NASDAQ:DTV), Dish Network (NASDAQ:DISH), and sector?

Comcast has been a poor relative performer, year-to-date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The company is making arrangements with EA to stream certain video games through its X1 cable box. The stock has been moving higher, but is currently trading sideways. Over the last four quarters, earnings and revenues have been on the rise, which has left investors pleased. Relative to its peers and sector, Comcast has been a poor year-to-date performer. WAIT AND SEE what Comcast does this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More From Wall St. Cheat Sheet:

• Comcast Wants Time Warner So Bad It Is Giving Up 3M Customers
• Comcast: Do Strong Earnings Sweeten the Time Warner Cable Deal?
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