Comcast: Staying Afloat For A Reason

| About: Comcast Corporation (CMCSA)
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Comcast Corporation (NASDAQ:CMCSA), one of the largest providers of entertainment, communications, and information access services and products in a $1 trillion industry, has had a phenomenal year. Over the past five quarters, accretive effects of new management policies have resulted in earnings per share (EPS) increases from $1.45 to $1.72. The company has had a string of earnings surprises, growth rates across the board for many relevant metrics and rising, and yield on the company's operating earnings is very positive.

Comcast's holdings are comfortably diversified across a variety of media products and service providers; the company operates 15 national cable networks, 13 regional networks in sports broadcasting and news services, 65+ international television channels, Universal Pictures, NBC Broadcasting network, Telemundo Broadcasting network, and the Universal theme parks in Orlando and Hollywood. Price/book ratio is at an outstanding 1.63, which is especially shocking given peer ratio values: 11.1 for British Sky Broadcasting (BSYBY) and over 2 for CBS Corp. (NYSE:CBS). Operating earnings per share and annual revenue have all substantially increased in the last two years, accelerating a longstanding trend of growth on the part of the firm. Clearly, the accretive effects of the merger with NBC Universal are beginning to manifest themselves in the recent business successes of this very viable media and entertainment corporation.

Looking ahead, the company has a lot going for it: summer revenues from the 2012 London Olympics programming should boost Q3 and Q4 reports; margins and EBITDA should be up by record percentages by the end of 2012. I've conducted a discounted cash flow valuation of CMCSA, which (using moderate assumptions for terminal growth and weighted average cost of capital) puts the implied price per equity share of Comcast at $34 - representing a substantial premium from current trading levels of near $28.

Downside risk to this outlook could stem from a significant consumer spending recession in the near future, which would come hand in hand with decreased investor confidence. An economic slowdown - which may not be as unlikely as previously thought - could significantly impact revenues in a negative way. Still, these potential risks would affect competitors such as Shaw Communications (NYSE:SJR), Siruis XM (NASDAQ:SIRI), Charter Communications (NASDAQ:CHTR), Virgin Media (NASDAQ:VMED), DirecTV (NYSE:DTV), Time Warner Cable (TWC), and Liberty Global (NASDAQ:LBTYK) as well - indicating that among peers, Comcast may be the best bet.

On balance, though, Comcast has done extremely well in 2012, and justifiably so. Opening near $23 in January, shares of CMCSA are trading closer to YTD highs today. There's a reason the May panic didn't afflict CMCSA shares as much as the broader market; the story is in the fundamentals and in the phenomenal numbers the company has posted in recent quarters. New investors - this is the perfect time to get in on the game: the board just declared a new quarterly dividend for shareholders. Investors should be comfortable looking to equity shares of CMCSA in the next weeks; in fact, accumulating some long-term call options or LEAPS on Comcast looking to the future wouldn't be a bad idea as well. For the near term, I'm going long CMCSA - and I recommend you do the same.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CMCSA over the next 72 hours.