Analysts Say Comcast’s Results Could Boost Sentiment on Cable Sector
Better-than expected Q3 results at Comcast could help turn around negative investment sentiment on the cable sector, said analysts who recommend investors buy shares of Comcast. The company’s Q3 subscriber and revenue results largely beat analyst forecasts. Comcast still lost 165,000 video subscribers during the quarter, but that was fewer than analysts expected and far fewer than it had lost during the same period a year earlier when it shed 275,000 video customers. It added 261,000 broadband customers and 133,000 phone customers.
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"The relatively strong cable results should help put to rest -- at least for a little bit -- the perennial 2Q and 3Q arguments that ‘cable is dead,'” Sanford Bernstein analyst Craig Moffett wrote. And results should remain impressive as they head into what is seasonally the strongest six months of the year, Moffett said. Comcast’s performance should “help revive sentiment for the sector,” wrote Collins Stewart analyst Thomas Eagan, saying results of Time Warner Cable and Cablevision had disappointed investors. Investors seemed to be waiting for a “big miss,” which did not materialize, wrote Wells Fargo analyst Marci Ryvicker.
Comcast executives attributed some of the improvement in subscriber metrics to recent marketing campaigns. “We did a really strong back to school campaign where we focused more on single and double product, and I think it showed in the video and high speed data results,” said Neil Smit, Comcast executive vice president and head of its cable systems. “We increased marketing this quarter and it was very targeted,” Smit said. “The Xfinity brand is now taking hold” and investments the company has made reducing the amount of analog video it carried, introducing DOCSIS 3.0 broadband, and spending on customer service and retention staff has paid off, he said.
And Comcast is on track to roll out its next-generation IP video service and guide dubbed Xcalibur next year, Smit said. It’s testing the service now in Augusta, Ga., and will introduce it in a major market in the first half of 2012, he said. “And we'll be rolling it out on a more widespread basis during the year,” he said. Beyond the new set-top boxes Comcast will be leasing to support the service, it will also be available on consumer devices such as the Xbox, he said.
At NBCUniversal, Comcast remains comfortable investing in the cable and broadcast networks and won’t hold back if it sees a good opportunity, said NBCU CEO Stephen Burke. For instance, buying the Spanish-language broadcast rights for the World Cup at Telemundo should help that network gain marketshare from Univision, he said. “We certainly don’t want to box ourselves into not being able to make those investments when they present themselves,” he said.
Q3 sales at Comcast, adjusting for its acquisition of NBCU, gained 4.9 percent from a year earlier to $14.3 billion, it said. Net income gained 34 percent from a year earlier to $1.16 billion.