Is Comcast Enticing After Recent Headlines?

With shares of Comcast (NASDAQ:CMCSA) trading around $53, 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.

Comcast proposed $45.2 billion takeover of Time Warner Cable (NYSE:TWC), which would combine the country’s top two cable providers into a colossus that could reshape the U.S. pay TV and broadband industry if it clears regulatory hurdles. The cable provider resulting from the merger will boast a footprint spanning from New York to Los Angeles with a near-dominant position in broadband Internet, which may raise the hackles of antitrust regulators. The deal, which would put Comcast in 19 of the nation’s 20 largest TV markets, could give it unprecedented leverage in talks with content providers and advertisers. The friendly takeover announced on Thursday comes as a surprise after months of a public pursuit of Time Warner Cable by smaller rival Charter Communications (NASDAQ:CHTR), and ir immediately raised questions as to whether it would pass the scrutiny of regulators.

T = Technicals on the Stock Chart Are Strong

Comcast stock has been trending higher over the past few quarters. However, the stock is currently pulling back and may need time to consolidate. 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 signals 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 minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.

As of Thursday, there is 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 minimal 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 = Average Relative Performance Versus Peers and Sector

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

Comcast has been an average performer, year to date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The company proposed $45.2 billion takeover of Time Warner Cable that would combine the country’s top two cable providers into a colossus that could reshape the U.S. pay TV and broadband industry. The stock has been trending higher over the past few quarters but is currently pulling back. Over the last four quarters, earnings and revenues have been increasing, which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Comcast has been an average year-to-date performer. Look for Comcast to OUTPERFORM.

More from Wall St. Cheat Sheet:

• Comcast Covers Up Recent Hack of at Least 34 Mail Servers
• Another One Bites the Dust: Comcast Buys Time Warner, Extending Cable Domination
• Comcast-Time Warner Merger: What’s in It for the FCC?