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.
Comcast is set to invest hundreds of millions of dollars in California and Florida theme parks. The Philadelphia Inquirer published a story on Sunday that said recent moves by the telecommunications and cable company show it’s set to challenge Disney (NYSE:DIS) in a sector long dominated by Disney. Comcast already has its foot in the door with theme parks. In 2011, Comcast took over Universal Orlando Resorts when it acquired NBCUniversal. This summer, a new Harry Potter ride is planned at another theme park near the Universal complex. Comcast isn’t stopping there.
An 1,800-room Cabana Bay Beach Resort is being financed by Comcast and Loews Corp. (NYSE:L) This massive resort will sit on the same 300-hectare Universal complex. CEO Brian Roberts explains that the initial investment is worth the payoff that will follow in the following years. “We think there is a lot there in the theme park business for many years to come, and that we have the low market share and only one way to go,” Roberts said at an investor conference in January.
T = Technicals on the Stock Chart Are Mixed
Comcast stock has been trending higher over the past couple of years. However, the stock is currently trading sideways 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 between its rising key averages, which signals 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.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| Comcast options |
23.3% |
13% |
10% |
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.
|
Put IV Skew |
Call IV Skew |
|
| April Options |
Average |
Average |
| May Options |
Average |
Average |
As of Monday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a small 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?
|
2013 Q4 |
2013 Q3 |
2013 Q2 |
2013 Q1 |
|
| Earnings Growth (Y-O-Y) |
27.92% |
-16.67% |
30.00% |
20.00% |
| Revenue Growth (Y-O-Y) |
6.21% |
-2.38% |
6.96% |
2.90% |
| Earnings Reaction |
1.63% |
-1.29% |
5.54% |
1.35% |
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), and Dish Network (NASDAQ:DISH) — and sector?
|
Comcast |
Time Warner Cable |
DirecTV |
Dish Network |
Sector |
|
| Year-to-Date Return |
-0.99% |
3.22% |
14.86% |
5.77% |
3.66% |
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 set to invest hundreds of millions of dollars in California and Florida theme parks. The stock has been trending higher over the past couple of years but is currently trading sideways. Over the last four quarters, earnings and revenues have been on the rise, which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Comcast has been a weak year-to-date performer. Look for Comcast to OUTPERFORM.
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More from Wall St. Cheat Sheet:
- Sorry, Disney: Comcast Wants to Make Dreams Come True, Too
- Netflix Coughs Up Cash to Comcast for Fast Streaming
- Outlook: Netflix Announces Multi-Year Agreement With Comcast