- Comcast should be riding high but it is not.
- Comcast stock has gone nowhere in a year and the yield is under 2%.
- A defensive strategy indicates you might want to get out of the stock now.
Comcast -A (NASDAQ:CMCSA) should be riding high.
It has a vertical integration strategy that its media rivals lack, with NBC TV and Universal Studios feeding the Comcast cable plant, and that cable plant is better positioned to deliver fast Internet than rivals like AT&T (NYSE:T).
Yet the Comcast stock has gone nowhere over the last year, while AT&T is up 8.9%.
Ratings at NBC are down. NBC has one new hit this year in Blindspot, with a 2.33 rating among adults 18-49, but its previous big hits, Grimm and The Blacklist, are falling off a cliff and may not make it into syndication. It's a double hit because 10 NBC stations in major markets are owned by the parent company. Its Hispanic affiliate, Telemundo, owns 14 more.
The cable networks are threatened by cord-cutting. Only MSNBC and SyFy rank among the top 25 channels, while only SyFy and Bravo rank among the top 25 ad-supported networks, and neither has as many as 400,000 regular viewers.
Universal’s list of 2016 movies already have a loser in Hail Caesar, and it is relying on sequels to such movies as Bridget Jones, Ride Along, and even My Big Fat Greek Wedding – the original is 14 years old. They did get Matt Damon back for a new Jason Bourne movie, early reviews on London Has Fallen look good, but if Dad’s Army and World of Warcraft fail it’s going to be a long year.
Comcast is trying to assure itself success by buying the Internet media that tells people what to watch, adding Rotten Tomatoes to a list that includes partly-owned Vox and Buzzfeed. But it’s tough to buy credibility when your corporate reputation is bad, as Comcast’s is.
In 2016 Comcast lost its effort to buy Time Warner Cable (NYSE:TWC) over the issue of “net neutrality,” the idea that Internet users should be able to access whatever legal sites they wish, without discrimination. Since then it has mainly sought loopholes in the order, like “zero rated programs," which don’t count against data caps. It has also tried to cut into Netflix (NASDAQ:NFLX) services with data caps that limit how much users can access it.
For 2015 Comcast revenues rose about 7%, earnings barely budged, and while the new 28 cents dividend is sustainable it comes to a yield of just 2%. Operating cash flow is expanding, coming in at $19 billion for the most recent quarter, but Comcast management does not appear eager to deploy its new assets. Naturally, it blames regulators.
Comcast can limit the damage from cord-cutting because it controls the channels in its line-up, and can favor its own stuff. But it can’t buy love, and it seems that it can’t buy growth, either. Comcast stock is becoming a great stock for those who want to keep their money safe, which in a recessionary environment is not entirely a bad thing. But it is no longer a growth stock and you can get better yields elsewhere.