Comcast and Cable Stocks: Pressured By Apple?

Comcast (CMCSA) reported a strong first quarter report, with revenue of $7.388 billion and EPS of 26 cents, topping the Street view of $7.36 billion and 17 cents. The company added 75,000 basic cable subscribers in the quarter, 644,000 digital subscribers, 563,000 cable modem customers and 571,000 VoIP customers.

(With 2.5 million VoIP subscribers, the company may now be bigger in Internet telephony than Vonage (VG), by the way; Vonage had 2.2 million customers as of the end of December.)

The company repeated previous guidance that 2007 cable revenue growth will be at least 12%, with cable operating cash flow growth of at at least 14%.

Thomas Eagan, an analyst with Oppenheimer, theorizes that the stock might be weak on lower free cash flow - $442 million, versus $807 million a year ago. But he says that would be “short-sighted,” given that he thinks the company will beat its current 2007 free cash flow guidance of $2.6 billion, which would be flat with 2006. Eagan noted that the company added more subscribers than expected in each of the categories mentioned above. Says Eagan: “Consistently impressive financial results, proven track record in turning around acquired systems and accelerated Triple Play rollout should, in our view, position Comcast for future value creation.”

Bernstein Research analyst Craig Moffett adds that “unit growth and pricing results were strong across the board, meeting high going-in expectations, with remarkable strength in high speed data.” Moffett says the lone weak spot was in advertising per subscriber, which came in at $4.31 versus his forecast of $5.62. The company blamed the weak ad number on a 12-week quarter versus 13 weeks a year ago.

Or, maybe there is another less obvious reason for the weakness. Comcast is not the only weak cable stock; the whole sector is softer. Maybe the real culprit is Apple (AAPL), with its mysterious new subscription accounting treatment for Apple TV. Maybe some people think the cable companies could be vulnerable to whatever yet-to-be disclosed subscription services the company might have in mind for its set-top box.

Comcast yesterday was off 87 cents to $27.22; Time Warner Cable (TWC) was off 43 cents at $36.76; Cablevision (CVC) was off 20 cents at $32.63; Charter (CHTR) was down 4 cents at $3.23.

CMCSA vs. TWC vs. CVC vs. CHTR 1-yr chart:

Comments

[five whys]

there is Apple TV.. and there is Verizon FIOS and there is YouTube.. the list goes on.

Comcast had a pretty good growth in last two years thanks to its well foresighted investment in the infrastructure.. its infrastructure advantage is now being challenged - its just the begining of next war for telephony and entertainment pipe at home.. VZ has head start in FIOS and AT&T is coming up right after to get the phone & TV customers..

[five whys]

just to follow up on my comment on Saturday - Verizon has been adding 2250 FIOS TV customer per business day in Q1 per NY Times / Reuters
www.nytimes.com/reuter...;oref=slogin

[five whys]

just heard a podcast on broadband trends..

Industry analyst expect that FIOS TV + DSL together, telecom carriers are expected to take over cable cos. in terms of growth in 2008..

telephonyonline.com/in.../