We reiterate our long-term Neutral recommendation on Comcast Corp. (CMCSA). The company reported excellent financial results for the first-quarter of 2011, easily beating the Zacks Consensus Estimates. Comcast has become a media baron after completing the acquisition of majority stake in NBC Universal. Some of the TV channels of NBC Universal has worldwide acceptance. Comcast, which is known for highly efficient management tactics, may now significantly develop NBC Universal’s sports and movie theaters that collect hefty fees from cable operators.
At present, Comcast turnout to be a highly diversified entertainment house, offering cable-TV/faster Internet connectivity, producing rich TV entertainment and film contents and operating a series of theme parks. For the last five quarters, the company is reporting strong growth in revenue and free cash flow. Decline in basic video customers was more than offset by massive growth of high-speed Internet, digital video and voice subscribers. We believe its merger with NBC Universal will not only give Comcast a competitive edge over its pay-TV rivals but also place the company head-on with media giants like Walt Disney Co. (DIS) and News Corp. (NWSA).
In the previous quarter, advertising revenue of the Cable Communications segment rose 10.4% year over year. Advertising revenue at NBC Universal’s cable networks increased 14% to $769 million together with an increase of 8% in advertising revenue of NBC Entertainment to $910 million. This trend is likely to continue in the near future due to an improving U.S. economy.
However, the stock price has moved up by 47% in the last year. We believe at present Comcast is fairly valued. Furthermore, Comcast needs to thoroughly revamp the NBC Universal businesses. Revenue from this segment fell 11.5% year over year in the previous quarter. We believe the immediate task of Comcast will be to lift the viewer-ship rating of NBC Universal.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
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