Leading All-Time High Stock On Wednesday: Comcast

| About: Comcast Corporation (CMCSA)

The Dow Jones closed at 13,511.23 with 0.17% decline on January 16, 2013. S&P 500 closed at 1,472.63 with 0.02% gain while Nasdaq finished at 3,117.54 with 0.22% increase. For NYSE, 1,385 stocks advanced, 1,630 stocks declined, and 130 stayed unchanged. For Nasdaq, 983 stocks advanced, 1,470 declined, and 102 stocks stayed the same. NYSE had 165 stocks making 52 week highs and 5 stocks making 52 week lows. Nasdaq had 102 stocks making 52 week high and 7 stocks making 52 week low.

Comcast Corp. (NASDAQ:CMCSA) led the all-time high list with a volume of 8,854,388 shares on January 16, 2013. CMCSA is the largest operator in the cable industry, reaching 53 million households.

Recent Developments

On Jan. 16, 2013, Comcast agreed to pay $150M for a stake in Arris Group Inc. (NASDAQ:ARRS) to forge closer ties with a manufacturer of its set-top boxes and high-speed Internet equipment. As reported by Bloomberg, the deal will be completed in conjunction with Arris's $2.35 billion acquisition of Google Inc. (NASDAQ:GOOG)'s Motorola Home Business as announced last month. Google and Comcast will each own about 7.85 percent of Arris's outstanding common stock after the Motorola takeover is completed. Arris expects that deal to close in the second quarter.

Galvanize is an innovation ecosystem that provides capital, community and curriculum to some of Denver's leading digital entrepreneurs and hottest technology startups. Galvanize has selected Comcast Business Class Ethernet to provide bandwidth connectivity to its entrepreneur and startup company members. Rich Jennings, regional senior V.P. of Comcast said that Comcast has connectivity handled and "It's no secret that advanced technology is the foundation for success in the startup world, and that's why it's so rewarding to partner with forward thinking organizations such as Galvanize to support entrepreneurs and power the next generation of innovation."

Analysts' Calls and Earnings Estimates

On. Jan. 15, 2013, Nomura Securities reaffirmed their "Buy" rating on CMCSA and increased its price target from $40 to $44. A Nomura Securities analyst noted,

"if Comcast and GE were to negotiate an earlier exit, the low leverage Cable could be used to fund the full buyout. The resulting Comcast would have a manageable 1.6x net Debt/EBITDA and generate nearly 9.4bn in fully taxed FCF in 2015."

Analysts at Barclays Capital reiterated an "equalweight" rating on CMCSA with a $39.00 price target on January 4, 2013. Lastly, Zacks reiterated a neutral rating on CMCSA with a $38.00 price target on Nov. 22, 2012.

Analysts, on average, are expecting an EPS of $0.53 with revenue of $15.99B for the current quarter ending in December, 2012. Analysts are estimating an EPS of $1.94 with revenue of $62.50B for the fiscal 2012. For 2013, analysts are projecting an EPS of $2.23 with revenue of $63.81B, which is 2.1% higher than 2012, as seen from the table below.

Source: Yahoo! Finance

Key Stats and Valuation

CMCSA has an enterprise value of $132.45B and a market cap of $104.11B. CMCSA has a total cash of $10.30B with a total debt of $38.59B. CMCSA has a book value of $18.40 per share. CMCSA generates an operating cash flow of $15.38B with a levered free cash flow of $18.63B. By using Morningstar's data, CMCSA's key stats will be compared to its peers in the industry of pay TV, including DIRECTV (DTV), Time Warner Cable Inc. (TWC) and British Sky Broadcasting Group PLC (BSYBY). CMCSA has a higher revenue growth (3 year average) of 17.5, which is higher than the industry average of 8.0. CMCSA has higher operating margin of 19.1%, ttm, and net margin of 9.7%, ttm, comparing to the averages of 18.5% and 6.7%, ttm, respectively. CMCSA generates lower ROE of 12.5, as compared to the average of 18.4. CMCSA has a debt-to-equity of 0.7.

CMCSA has P/E of 17.9 and P/B of 2.1, which is lower than the industry averages of 18.1 and 4.3 but higher than CMCSA's 5 year averages of 16.6 and 1.4. CMCSA has a forward P/E of 14.6, which is higher than S&P 500's average of 13.3. CMCSA has a PEG of 1.0.

Technical Analysis

CMCSA closed at $39.18 with 0.05% loss on Wednesday. The volume of 8.85M was 22.77% less than the 30 day average volume of 11.46M. CMCSA had been trading in the range of $25.31-$39.29 in the past 52 weeks. CMCSA has a beta of 1.09. The MACD (12, 26, 9) indicator had been showing a bullish trend with diverging MACD difference. The momentum indicator, RSI (14), was showing a strong bullish lean at 67.38. CMCSA was trading above its 50-day MA of $37.08 and 200-day MA of $33.34. CMCSA had also broken through its R2 resistance point of $39.04, as seen from the chart below.

Source: Yahoo! Finance

Options Strategy

For the reviewed credit put spread of April 20, 2013 $28/$33, published on Nov. 23, 2012, it is currently yielding 12.61% return on margin. For more aggressive investors, a new credit put spread will be reviewed below, which will allow investors to acquire the stock below the current price while gaining some upside potentials.

  • Short 1x July 20, 2013 put at the strike price of $35.00 for the credit of $1.00
  • Buy 1x July 20, 2013 put at the strike price of $32.00 for the cost of $0.52

The maximum profit is $0.48, and the maximum risk/margin requirement is $2.52 ($3 loss - $0.48 credit received). If CMCSA closes above $35.00 on July 20, 2013, 19.04% return on margin will be gained. If CMCSA falls below $35.00 upon options expiration, CMCSA stock will be acquired at $34.52, which is 11.89% lower than the current near all-time high price of $39.18.

Note: All numbers/prices are quoted from the closing of January 16, 2013 with the data provided from Barron's, Morningstar, Barchart.com Inc. , Google Finance, and Yahoo! Finance. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CMCSA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Problem with this article? Please tell us. Disagree with this article? .