Comcast (CMCSA, Financial) is the largest operator in the cable industry. The firm also offers Internet access and phone service. Comcast markets are Philadelphia, Chicago, San Francisco, Seattle and Boston.
In 2011, the firm combined its cable networks with NBC Universal to create a new 51%-owned venture.
The core cable business is the driving force behind Comcast, providing two thirds of consolidated revenue and more than 80% of EBITDA. The capability of its networks can offer a full complement of television, Internet, and phone services.
Comcast now provides phone service to about 18% of the homes in its territory and the business is growing despite the secular decline of the fixed-line phone business.
I think Comcast does not have a match in terms of the multiple services it offers over one connection within the territories. Moreover, it has a high customer loyalty and the multiple services it delivers trigger higher cash flow per subscriber.
Comcast's network should give it a platform to meet customer demands well into the future at modest incremental cost. The firm has deployed DOCSIS 3.0, a technology that allows far faster Internet access speeds than those typically available today, while actually cutting capital spending.
Comcast should also benefit from the small and medium-size business service market.
The combination with NBCU provides Comcast a clear view of the future of television in terms of content creation and distribution of the industry. This perspective should give Comcast new offerings and technologies that create value for both companies.
With the NBC Universal integration the firm continues to take share in the residential telecom market, putting up solid customer growth figures and growing its commercial services business rapidly. However, the ups and downs of the NBCU content business may cause variability in Comcast's reported results. Nevertheless, the cable side of the house will bring solid, steady results for the foreseeable future.
The NBCU integration also involves certain risks for Comcast. The content creation business is going through several changes with modifications in consumer habits. In terms of cable, the Bells are aggressively promoting DSL service, a viable alternative to cable modems, and are upgrading some of their networks to offer television service.
The satellite firms remain dangerous. Changing regulation is also a risk.
Last quarter results
Consolidated revenue for the third quarter increased 51.1% to $14.3 billion, and consolidated operating cash flow grew 27.8% to $4.6 billion. Altogether, they reflect organic growth in the cable business.
NBCU increased the firm's debt load to about $40 billion, equal to 2.2 times combined EBITDA, which remains very solid for a cable company.
Michael J. Angelakis, vice chairman and chief financial officer for Comcast Corporation has announced, “Year-to-date, total Cable capital expenditures have increased 4.1% to $3.5 billion, equal to 12.6% of revenue. We are executing well on our 2011 capital plan and believe our capital intensity can continue to moderate even as we invest capital in areas that provide attractive returns, expand our service and product offerings and drive future organic growth.”
Valuation
When I see a complete picture of how CMCSA is trading in comparison to its multiples valuation bands from the past 10 years, the stock looks undervalued. For example, it is trading in the lowest band of its P/E, P/S and P/B ratios. CMCSA is much stronger business it was some years ago yet it is trading with much compressed valuation.
I also like the fact that some prominent Gurus hold and like the stock.
For example Ray Dalio increased his position in the last quarter (at prices very similar to the current ones). Bill Gates investment vehicle initiated a position at the current levels.
Management & Stewardship
The biggest issue is that the founding Roberts family owns the entire super voting Class B shares, thereby holding 33% voting control of the firm. Holders of Class A shares have the remaining voting power.
President and CEO Brian Roberts took the chairman spot in May 2004; COO Stephen Burke leads NBCU. He joined Comcast in 1998 to head the cable business after more than a decade at Disney. Neil Smit runs the cable business. Smit was previously the CEO of Charter Communications.
In 2011, the firm combined its cable networks with NBC Universal to create a new 51%-owned venture.
The core cable business is the driving force behind Comcast, providing two thirds of consolidated revenue and more than 80% of EBITDA. The capability of its networks can offer a full complement of television, Internet, and phone services.
Comcast now provides phone service to about 18% of the homes in its territory and the business is growing despite the secular decline of the fixed-line phone business.
I think Comcast does not have a match in terms of the multiple services it offers over one connection within the territories. Moreover, it has a high customer loyalty and the multiple services it delivers trigger higher cash flow per subscriber.
Comcast's network should give it a platform to meet customer demands well into the future at modest incremental cost. The firm has deployed DOCSIS 3.0, a technology that allows far faster Internet access speeds than those typically available today, while actually cutting capital spending.
Comcast should also benefit from the small and medium-size business service market.
The combination with NBCU provides Comcast a clear view of the future of television in terms of content creation and distribution of the industry. This perspective should give Comcast new offerings and technologies that create value for both companies.
With the NBC Universal integration the firm continues to take share in the residential telecom market, putting up solid customer growth figures and growing its commercial services business rapidly. However, the ups and downs of the NBCU content business may cause variability in Comcast's reported results. Nevertheless, the cable side of the house will bring solid, steady results for the foreseeable future.
The NBCU integration also involves certain risks for Comcast. The content creation business is going through several changes with modifications in consumer habits. In terms of cable, the Bells are aggressively promoting DSL service, a viable alternative to cable modems, and are upgrading some of their networks to offer television service.
The satellite firms remain dangerous. Changing regulation is also a risk.
Last quarter results
Consolidated revenue for the third quarter increased 51.1% to $14.3 billion, and consolidated operating cash flow grew 27.8% to $4.6 billion. Altogether, they reflect organic growth in the cable business.
NBCU increased the firm's debt load to about $40 billion, equal to 2.2 times combined EBITDA, which remains very solid for a cable company.
Michael J. Angelakis, vice chairman and chief financial officer for Comcast Corporation has announced, “Year-to-date, total Cable capital expenditures have increased 4.1% to $3.5 billion, equal to 12.6% of revenue. We are executing well on our 2011 capital plan and believe our capital intensity can continue to moderate even as we invest capital in areas that provide attractive returns, expand our service and product offerings and drive future organic growth.”
Valuation
When I see a complete picture of how CMCSA is trading in comparison to its multiples valuation bands from the past 10 years, the stock looks undervalued. For example, it is trading in the lowest band of its P/E, P/S and P/B ratios. CMCSA is much stronger business it was some years ago yet it is trading with much compressed valuation.
I also like the fact that some prominent Gurus hold and like the stock.
For example Ray Dalio increased his position in the last quarter (at prices very similar to the current ones). Bill Gates investment vehicle initiated a position at the current levels.
Management & Stewardship
The biggest issue is that the founding Roberts family owns the entire super voting Class B shares, thereby holding 33% voting control of the firm. Holders of Class A shares have the remaining voting power.
President and CEO Brian Roberts took the chairman spot in May 2004; COO Stephen Burke leads NBCU. He joined Comcast in 1998 to head the cable business after more than a decade at Disney. Neil Smit runs the cable business. Smit was previously the CEO of Charter Communications.
