Insights

Why Comcast Stock Is Down More Than 6% on Friday

What happened

Comcast (NASDAQ: CMCSA) shares are down 6.6% as of 11:24 a.m. ET Friday, according to data from S&P Global Market Intelligence, following a disappointing Q2 earnings report that prompted several analyst downgrades.

So what

Equity research outfits JPMorgan, Macquarie, and Wolfe helped fuel Friday’s stumble. Each downgraded the telecom and entertainment giant today, while a handful of analysts lowered their price targets on the stock without necessarily changing their official buy/sell stance.

Of course, it’s difficult to blame any of these research teams for their actions. The company’s second-quarter report showed a loss of more than half of a million cable TV customers, no significant additions of broadband subscribers, and no meaningful growth in the number of consumers paying for access to Peacock, Comcast’s streaming service. While its cable television attrition is nothing new, it’s the first time the company has failed to add broadband customers since it launched high-speed internet service, according to The Wall Street Journal.

Comcast still earned $1.01 per share, up nearly 17% from the year-ago period and topping estimates by roughly $0.10 per share. The stagnating broadband and Peacock subscriber numbers, however, may suggest both markets are well saturated, and that any future growth could be very difficult — and expensive — to produce.

Now what

Friday’s sell-off translates into a 14%-plus loss in the two days since Comcast’s second-quarter results were posted. Moreover, shares are at new 52-week lows, down a hefty 40% from last September’s high.

There’s the rub. While this week’s quarterly report and subsequent downgrades make sense in and of themselves, these results and analysts’ newly voiced worries have actually been being priced in since the latter part of last year.

That’s not to suggest Comcast still doesn’t owe current and prospective shareholders a clear, plausible plan to handle its headwinds. Even with this week’s wave of downgrades and lowered price targets, though, the stock is a compelling (if speculative) buy while it’s priced 35% below Wall Street’s consensus target. The analyst community also still collectively rates the stock as a buy, perhaps because it’s priced at less than 10 times next year’s expected per-share earnings of $3.97.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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