Where Will Comcast Go Next?

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.

As Comcast and Time Warner Cable (NYSE:TWC) roll out a massive lobbying effort to win regulatory approval for the merger of the nation’s two largest cable companies, one key step for the companies will be garnering the support of prominent civil rights and minority groups. Comcast has already shown it can pull support from key minority groups — dozens sent letters of support to the Federal Communications Commission, which must approve the buyout, while it was considering Comcast’s last mega-deal — its 2011 purchase of NBC/Universal.

As tax data analyzed as part of a collaboration between the Center for Public Integrity and the New York Times show, 55 such groups both accepted funds from Comcast’s corporate foundation between 2004 and 2012 and sent letters to the FCC supporting the Comcast-NBCU deal. Those include large and well-established organizations such as the National Urban League, which received $835,000 from Comcast’s foundation during the period, as well as local groups such as the Boston Chinatown Neighborhood Center, which received $42,300 in grants from Comcast since 2009.

T = Technicals on the Stock Chart Are Mixed

Comcast stock has been trending higher over the past few quarters. However, the stock is currently trading sideways and may need time to stabilize. 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 between its rising key averages which signal neutral 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 significant 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 and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral 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 rising 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. As the company  and Time Warner Cable roll out a massive lobbying effort to win regulatory approval for the merger of the nation’s two largest cable companies, one key step for the companies will be garnering the support of prominent civil rights and minority groups. The stock has been trending higher over the past few quarters but is currently trading sideways. 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 a weak 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:

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• DirecTV Says Comcast Merger Must Be ‘Appropriately Scrutinized’