On Thursday, Pivotal Research adjusted its price target for Comcast Corp (NASDAQ:CMCSA), dropping it to $48 from the previous $55, while still recommending the stock as a Buy. The change reflects a reassessment of the company's financial forecasts for 2024, taking into account the increasing competition in the telecommunication sector. The firm noted that the competition is becoming particularly fierce for lower-income households and is now also escalating in the business sector, influenced by Fixed Wireless Access (FWA).
The adjustments to Comcast’s 2024 projections were made to account for the anticipated impact of the Affordable Connectivity Program (ACP) during the second and third quarters, which could lead to slightly lower average revenue per user (ARPU) and higher subscriber losses. Additionally, accounting changes at Comcast’s European subsidiary, Sky, are expected to reduce connectivity growth by 100 basis points each quarter for the year 2024. These factors contributed to the revision of the estimated cable EBITDA multiple from 8X to 7X, which is still considered well below the replacement value of these assets.
Despite the reduction in the price target, Pivotal Research sees the current valuation of Comcast as attractively low, with the stock trading at 6.3X projected 2024 EBITDA, 9.7X expected 2024 earnings per share (EPS), and 11X forecasted 2024 free cash flow (FCF). The firm suggests that the market may maintain these low valuations until the effects of the ACP are fully realized and investors gain confidence that FWA will not disrupt the traditional cable business model.
Pivotal Research remains optimistic about Comcast's potential to regain market share from FWA providers due to the increasing importance of internet speed and rising data consumption trends. The firm also speculates on the possibility of Comcast making a strategic acquisition of Warner Bros. Discovery (NASDAQ:WBD) (N/R) following the two-year anniversary of Discovery's purchase of Warner, which could be acquired at a relatively low cost and significantly enhance Comcast's content and streaming video on demand (SVOD) offerings. The article suggests that investors might favor such an acquisition if it included a spinoff of the content assets.
In conclusion, with the new price target at $48, Pivotal Research anticipates Comcast to trade at 7.4X EBITDA, 12X EPS, and 14X FCF by the end of 2024 and reaffirms its Buy rating on the stock.
InvestingPro Insights
Comcast Corporation (NASDAQ:CMCSA) is currently trading at a compelling valuation, with a P/E ratio of 10.2 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at just 9.72. The company's shareholder-friendly actions are highlighted by an aggressive share buyback program and a consistent history of dividend payments, having raised its dividend for four consecutive years. This commitment to returning value to shareholders is further emphasized by the company's dividend yield of 3.08% as of April 2024.
InvestingPro Tips suggest that Comcast, a prominent player in the Media industry, trades with low price volatility and is predicted to remain profitable this year. While the company's short-term obligations exceed its liquid assets, it has maintained dividend payments for 17 consecutive years, demonstrating financial resilience and a commitment to shareholders.
For a deeper analysis and additional strategic insights, readers can explore more InvestingPro Tips for Comcast at https://www.investing.com/pro/CMCSA. There are 11 additional tips available, which could provide further clarity on the company's financial health and market position. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a comprehensive toolkit for savvy investors.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.