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Recent Buy: Comcast

Mar. 04, 2020 1:10 AM ETComcast Corporation (CMCSA) Stock48 Comments


  • This analysis of Comcast stock uses a 10-year time frame and assumes a recession will occur at some point over that period.
  • It projects expected returns from sentiment reversion-to-mean and business/shareholder yield based on the last economic cycle.
  • It offers a Buy/Sell/Hold suggestion.
  • I do much more than just articles at The Cyclical Investor’s Club: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »



The recent coronavirus pandemic has caused me to take some interesting actions in my portfolio recently. Since I think a recession or serious economic slowdown is highly likely, I raised a lot of cash last week, and on Friday morning I was about 70% cash. If you are interested you can read about those actions and the thinking behind them here. There is a bit of irony that immediately after raising cash from my 'default ETFs' I started buying individual stocks that I judged to be good values. Comcast (NASDAQ:CMCSA) was one of those stocks. In this article, I'll take you through my reasoning for that purchase.

I always start off my analysis of any stock by trying to form a foundation using historical numbers. Sometimes, adjustments need to be made to assumptions based on those numbers, but my view is that I want the numbers to at least look reasonable in order to get me interested based on their likely future 10-year returns.

So, as part of my historical analysis, I calculate what I consider to be the two main drivers of future total returns: Market Sentiment returns and Business/Shareholder returns. I then combine the CAGR estimates from Market Sentiment and Business/Shareholder returns to get an expected 10-year, full-cycle CAGR estimate. Currently, I consider an expected 10-year CAGR > 12% a "Buy," 4-12% a "Hold" and < 4% a "Sell."

How Cyclical Are Earnings?

Since I use different approaches for analyzing a stock based on how cyclical earnings are, historical earnings cyclicality is the first thing I examine. Let's take a look at Comcast's historical earnings using a F.A.S.T. Graph to examine that cyclicality:

I break down earnings cyclicality into five basic categories. The first category I call "secular growth." This category describes earnings that continue to rise every year, even

If you have found my strategies interesting, useful, or profitable, consider supporting my continued research by joining the Cyclical Investor's Club. It's only $29/month, and it's where I share my latest research and exclusive small-and-midcap ideas. Two-week trials are free.

This article was written by

Cory Cramer profile picture

Cory Cramer is an award-winning political scientist and a long-only cyclical investor capitalizing on market cycles. He has been investing since the 1990s and still invests his own money in the companies he writes about.

Cory leads the investing group The Cyclical Investor's Club where he shares his unique approach to estimating the fair value of stocks by capitalizing on downcycles for undervalued companies. He teaches 4 unique cyclical strategies, offers a master valuation spreadsheet, and is available to answer any questions via chat or direct message. Learn more.

Analyst’s Disclosure: I am/we are long CMCSA. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (48)

Cory Cramer profile picture
Trump has his fans on CNBC. Hell, his economic advisor is from CNBC.
Has nothing to do with politics. I don’t care which side is being promoted or bashed. National emergency’s come first. Time to stop being a horses behind.
This writeup misses out on an important aspect IMO: the majority of Comcasts revenue comes from contractual, recurring billing. In times of economic uncertainty a (effectively) guaranteed cash inflow is king.
Cory Cramer profile picture
Thanks for the comment, sss666. While I didn't explicitly say that in the article it is assumed that is the case to a large degree. When I noted how steadily earnings have grown this cycle, and estimated that growth rate, the fact that recurring income helped make that happen is taken into account. I do think that we need to be realistic about the next downturn being worse than the previous one and investments that are going to be made in streaming (likely at the same time). So rather than extrapolate their 18% earnings growth into the future for the next 10 years, I lowered that expectation to 10%. I actually think I'm being fairly optimistic with the 10% number. Their revenue from NBC/Universal is going to be more cyclical and cable tv subs are slowly declining. So, while I'm obviously long-term bullish here because I bought the stock, I also want to be realistic that it's going to be a bumpy ride.
Thanks for the reply. I'm sure you covered it, but Comcast subscribers are growing, but as you said the cable subs are dropping off at a steady clip. Of particular fear is Comcasts focus on their business servicing unit (that, along with the government unit make up a lot of their large growth segment) and how the virus will impact both the build out of fiber lines and the willingness of businesses to upgrade.

Have the past couple of days impacted your opinion of CMCSA, or others?
Cory Cramer profile picture
In the context of my overall strategy, it hasn't impacted my decision to buy. I'm holding over 50% cash right now, and so is my suggested strategy in the Cyclical Investor's Club. My approach is to buy stocks whenever they look like good long-term values and to take small positions in them. So far, since the sell-off began, I have bought three positions. So, I have a long way to go before running out of cash, and my view is that all I can really do is buy stocks when they look like pretty good values. If I only had limited cash, I would probably demand a lower price for Comcast given the current headwinds, but for me, following my strategy is the most important thing right now. It's easy to freeze up when the market is falling and not buy stocks when they are relatively cheap. Comcast is the first one I bought, so if the market ends up falling -50%, it's not going to look like a very smart buy, but in the context of my larger strategy I think it will do okay. (And, I don't really know when the market is going to bottom.)
Earnings are one thing, free cash flow and what management decides to do with it is another. My concern is that Comcast is caught in the same trap that many telecom and big cable companies have found themselves - constant need for capital investment and acquisitions and that major share buybacks and dividends are constantly postponed. While its business doesn't require the same level of infrastructure investment as, say, Verizon, Comcast's business is surprisingly capital intensive. Moreover the rapidly evolving nature of the media/telecom industry combined with heavyweight competitors bidding up asset prices is not a healthy situation. A decade ago, Comcast management claimed that as the cable market reaches saturation/maturity, then Comcast could really open up the cash spigots and reward investors handsomely.

But the market and technology have evolved greatly and thus the need (or perceived need) to invest heavily in content and potentially new distribution channels/technologies. Given that the competition also has to make these investments (at least to hedge their bets in case these new distribution channels/technologies succeed and cannibalize the existing business) I wonder if Comcast and others will ever be able be able to get off the heavy investment treadmill on which it's stuck. I like CMCSA, but for a long-term INVESTOR, the stock is only worth as much as the present value of the future cash flows received.
Cory Cramer profile picture
I think those are valid concerns, rafael.
5ofDiamonds profile picture
Congrats on the buy @Cory Cramer

I hope they improve their customer service :-)
Cory Cramer profile picture
@5ofDiamonds Ha! I wouldn't bet on that :)
Jamjack profile picture
Yea, I have comcast. No choice. I own my own modem-WiFi for broadband. That's it. Bill is auto-pay. I am so glad it has been more than 7 years since I've had to deal with anyone at comcast. Other utilities that own or ride the same pole, please don't accidentally cut my line and end the streak.
Steve Rasher profile picture
@Cory Cramer Like you, I have been carefully and tactfully buying undervalued stocks. $CMCSA is one I recently identified and bought in early February, unfortunately before the current down draft in the market. Nevertheless, I agree that it will reward patience and a long term view. Steve
Cory Cramer profile picture
Thanks for the comment, Steve. Before the downturn I had only bought one stock in the previous 4 months, and I'm looking virtually every day for something. I bought two during the downturn last Friday morning, and this was one of them. It's not that I don't want to buy. During the 2018 correction, I bought a lot of stocks. It's just that I can't justify paying the current prices. It would probably take a -40% move down in the S&P 500 to get all my cash deployed at this point. So, I wait and pick them up when they look pretty good. That's all I can really do at this point.
A_Fava profile picture
It's a good "buy the dip" stock given it's lack of business in China outside of entertainment and the ever increasing reliance on internet. With a good dividend, it's a good position to have for exposure in telecom.
Cory Cramer profile picture
Thanks for commenting, A_Fava. I agree. And it looks like a good relative value as well. I expect them to take a hit the next year or two, but at least some of it appears to be priced in by the market already.
Any comment on Sky's future contribution and growth. (I see Disney will be offered in UK and Ireland trough Sky).
Cory Cramer profile picture
I don't really know enough about Sky's contribution long-term to say. Initially, it looks like they are on track to meet management's expectations. Typically, I try to avoid the stocks of businesses that have recently done a lot of M&A because most of the time it doesn't usually live up to expectations. But in this space, M&A is impossible to avoid. I've actually studied Disney more, and I'm quite bearish on them. If I was a long/short trader I would put a long Comcast/short Disney trade on with a lot of confidence here and it would probably be a better bet than only going long Comcast. I have yet to write about Disney because I've been working on a Disney project for the Cyclical Investor's Club and haven't finished writing it yet. It was actually the work on Disney that attracted me to Comcast because I thought Comcast looked so much better in comparison.

So, I don't know how Sky will work out, but I do think management has a good track record. In the end, I think it's as much about preventing earnings declines as it is about getting growth, so I'm pretty conservative in my expectations overall. But the valuation here is pretty good.
Buyandhold 2012 profile picture
With a 5 year expected PEG ratio of 1.01, Comcast is a buy.
Cory Cramer profile picture
And so I have. Thanks for dropping by. See, I don't only write 'sell' articles :)
Comcast is a pos. This stock is a perfect example of a pump and dump. Stay away!
Cory Cramer profile picture
How is it a pump and dump?
5G mm wave (e.g. the one that can support broadband) will take a long time to roll out. The effective range for > 1Gb is less than a few hundred meters so that means you have to put a "tower" (antenna) on just about every telephone pole. Ignoring the local regulation issues for putting up cell towers you still have the issue of laying fiber to handle all of the back haul. In the end whoever has the most wired broadband on the poles wins.It's too bad Comcast didn't try to become the fourth cell carrier as they were perfectly positioned. Dish is going to fail miserably.
Cory Cramer profile picture
Yeah, I really think the price is cheap because of 5G prospects, and, as I said in the article, I'm willing to take the other side of that bet when the price is this cheap.
Theres tons of other wireless provider opportunities without being a full on carrier. Something like > 90% of cell data usage/output is within 5% of the country. Dual SIM (like in Europe) hopefully coming over to the US will provide a lot of opportunity for any fiber carrier. Disclaimer: I'm long Comcast.
That's an interesting statistic (90% within 5%). Do you have the source for that? This implies 5G rollout will only be in urban areas but there are issues their too (e.g. interference). Anything can block a 5G signal. Fixed point to point makes sense (e.g. phased array antenna on the outside of structure) but I still don't see 5G replacing 4G anytime soon.
Angelo_A profile picture
i do think it's a good buy right now but would rather wait after first trimester results to initiate a position.
I do own them and Disney since 2012, btw
Cory Cramer profile picture
Thanks for the comment, Angelo. I don't own any other media companies and price looked right on this one.
Kenmare profile picture
Americans may be spending a lot more time at home if the epidemic significantly worsens. In that case, Comcast might make a very good trading play.
Cory Cramer profile picture
There are obviously some risk with coronavirus, too, but it's at least trading at a reasonable price.
Librarian Capital profile picture
I am not sure it's meaningful that, in "the last recession ... Comcast grew EPS straight through the recession", because the more cyclical (and partially advertising- and consumption-driven) NBC Universal business was not acquired until after the crisis in 2010. Also, Charter, the other large cable company, went bust in 2009.

I actually do think Comcast will prove resilient in a downturn, but for different reasons from those in this article.
Cory Cramer profile picture
Your articles on Comcast are great Librarian Capital. I learned a lot from them. Comcast isn't an ideal candidate for my fairly simple approach here because of the M&A etc, but I think my basic assumptions for earnings growth are probably at least in the ballpark. The final straw for me is the relative value compared to the rest of the market. It looks pretty cheap. Something would have to go seriously wrong to lose money over the long-term.
Librarian Capital profile picture
Thank you for saying nice things about my work.

I am against high-level "analyses" using historical financial databases in general, whether Bloomberg or FAST Charts, because they are misleading for companies with historic M&A or exposure to more than one currency (so basically most of the S&P 500).
Cory Cramer profile picture
I actually agree with you, and that for most stocks, it's only just a starting point. I recently categorized the S&P 500 so that it excluded stocks that I didn't think this approach was easily applicable, and found only about 186 out of 500 is the approach useful without a whole lot of adjustments. And as I examine some of these closer I'll probably find a few more where it doesn't fit well. So, perhaps for 150 stocks out of 500 is this analysis straightforward and easy. The rest require more judgment and work.
That said, it can be a great starting point or baseline to work from. And SA is a great resource because when I find something that looks interesting, I can go read a few articles like yours, and then read some from people who disagree and make judgments about who seems most reasonable regarding the changes that have taken place or will take place for the businesses.
Also, one's overall investment strategy is a really important factor, too. Mine takes small positions in a relatively large number of stocks, because I know there are going to be some things I miss about these businesses along the way due to my not digging deeply into each one of them, truly understanding all aspects of their business. If someone has a concentrated portfolio then it is essential to do a lot more work on each purchase and to understand things that the market is getting wrong.
g23riel profile picture
And yes, they have anti consumer reputation, just like xm / seri company where folks really dislike them. I have used all, including att, and I found T the most palatable.
Cory Cramer profile picture
I'm going to be honest here, @g23riel. I hate cable companies and I think cable tv is the worst consumer value ever created. I think it's ridiculous consumers would pay to watch commercials. I've only paid for cable one year in my entire adult life when they offered me a discounted rate for a year after I bought my house. I canceled as soon as the year was up in 2009. I had Mediacom and they were horrible. So, I get it.
That said, lots of people are willing to pay for it, and these guys are not willing to give their products away for free. Milking that for as long as they can until forced to switch to lower revenue products is something I think makes good business sense. These guys protect their profits. As a shareholder, I like that.
g23riel profile picture
And they do have the customer line especially created for those who want to stop services, and very trained service folk meant to impersonate someone who cares about stopping the service. Not bad as an investor :)
g23riel profile picture
I believe that communication will continue gaining speed, and that folks will choose more internet based over land based Entertainment. The Comcast growth could be from Comcast being cable provider, but the sweet packages that would get the big bucks will be lower. So, double hit, from fewer cable subscribers and the ones that stay getting fewer premium services. I’d love to see the growth for each one itemized, that’s what would make a difference.
Cory Cramer profile picture
They are going to be hit. I just think it will be slower than the market thinks it will.
Bonk Comcast service, employees , installation and call center are horrific.. anybody but them..
You want a return buy Cintas Ecolab they provide protection for Covid 19
2959 profile picture
Love/Hate relationship with Customer service (as with many businesses) but people still need a pipeline for data. You can drop media, but not the access. And the 5G hyperbole isn’t here especially if you have more than a single person household in a specific area. But, Comcast will also have that covered using Verizons backbone for there offered cellular services.
Jamjack profile picture
Well stated. I was really surprised by what T just announced as their T.V. offering. You have got to be kidding me. I might as well buy Comcast-NBC-Universal. Not much in that T t.v. offering that comcast can not do or be able to do in the near future. I sold half my position in T. They are not executing well with their WarnerMedia, service is pricey, customer service sucks, and 5G will be the best they have going for them beyond content production. Comcast-NBC-Universal can produce too.
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