Comcast has a discounted stock, a lucrative business, and a restive shareholder base.
That’s a good setup for investors. Plenty could go right for the cable and entertainment conglomerate, including a corporate breakup, with Comcast’s low valuation offering downside protection. The company has attractive assets that are valued at a fraction of its replacement cost.
Comcast controls the largest broadband footprint in the U.S. with 31.8 million subscribers. It owns NBC, Universal Pictures, Universal theme parks, European satellite TV operator Sky, the Peacock streaming service, and cable properties including CNBC, MSNBC, USA Networks, and Bravo. The Philadelphia-based company even owns the hometown Flyers of the National Hockey League.
Barron’s Jack Hough earlier this year called Comcast ” America’s most complicated company,” and that highlights the simplification opportunity.
The shares, at about $36, are down 40% from their 2021 peak of $61 and badly trailed the S&P 500 index over the past one, five, 10, and 25 years.
Comcast is valued at just eight times projected 2025 earnings, a discount to its major cable and telecom peers and one of the lowest price/earnings ratios in the S&P 500. It has a secure 3.6% dividend yield and bought back about 5% of its stock last year. Analysts see similar repurchases in 2025. Bulls like analyst Craig Moffett of MoffettNathanson Research have price targets of over $50 a share.
Yet investors don’t appear crazy about Comcast’s conglomerate model. It wouldn’t be surprising to see an activist investor like Elliott Investment Management surface this year. In early February, Wolfe Research analyst Peter Supino laid out what could become an activist playbook in an open letter to Comcast CEO and controlling shareholder Brian Roberts, 65. Supino urged the company to split into three parts: cable and broadband, NBC/Universal Sky, and cable TV networks.
The company is already focused on six growth areas: consumer broadband, wireless, business broadband, streaming, parks, and movies, which account for more than 60% of its revenue. It announced plans in November to spin off a group of cable networks in 2025, led by USA Networks, CNBC, and MSNBC, into an unnamed company — Bravo is excluded.
Those cable businesses, with a total of $7 billion in annual revenue, are viewed as slow growers. Supino says they may get valued at $8 billion to $10 billion, or just four to five times his estimate of annual earnings before interest, taxes, depreciation, and amortization, or Ebitda.
Supino thinks more is needed. The proposed spinoff isn’t large relative to Comcast’s $140 billion market value and wouldn’t have much impact on the stock price. Comcast’s enterprise value — its market value plus net debt — is about $230 billion.
A problem with the breakup scenario is that CEO Roberts, the son of Comcast founder Ralph Roberts, isn’t on board with it. The stock trades as if the scenario won’t materialize. The company’s view is that a diversified model is best, as was demonstrated during the pandemic. A 2022 study by Bain analysts found that corporate spinoffs often generate little or no benefit to shareholders.
Roberts controls the company through a small slice of supervoting stock — some nine million shares — that give him a one-third vote. His economic interest in the company is just 1%. While he owns over $1 billion of stock, he controls one of the smaller percentage stakes of any major family-controlled company.
In his letter, Supino criticized Roberts for his compensation of $340 million over the past 10 years — and for acquiring “zero shares of Comcast in the open market” over that span. Much of his compensation comes in stock.
What about the competition? Comcast has a better balance sheet than the No. 2 cable and broadband company, Charter Communications, and is returning far more cash to shareholders.
But Comcast trades at a discount to Charter at six times estimated 2025 Ebitda based on its enterprise value, against 6.6 times for Charter. That could reflect an investor preference for the pure-play Charter, which is focused on broadband and cable.
Comcast’s stock weakness over the past year reflects investor concerns about steady but modest subscriber losses in broadband, its most important business. Broadband and cable account for about 80% of its pretax cash flow.
The broadband concerns intensified after Comcast’s fourth-quarter results in late January showed a decline of 139,000 subscribers, against estimates of close to 100,000. While Roberts lauded “the best financial performance” in the company’s 60-year history, analysts weren’t happy that revenue was up less than 2% during the year.
“Closing the Books on a Miserable 2024” was how Moffett titled his report, noting ongoing broadband losses and the stock being 40 percentage points behind the S&P 500 over the prior year.
The stock fell 10% in the wake of the earnings news, although it has since recouped much of that loss.
The company didn’t give 2025 guidance, but investors were rattled by a comment by Comcast President Michael Cavanagh that broadband “competitive conditions remain intense, dynamic, and varied” with “no signs of this changing in the near term.”
Telecom companies like AT&T are taking on Comcast in broadband with fiber, as well as fixed wireless internet services that offer less speed than cable broadband but are also less expensive. Consumers increasingly have two — or more — choices for home broadband. Looming, as well, is potential competition from Elon Musk’s satellite-based service Starlink.
Comcast’s plan is to more aggressively market a combination of broadband and wireless, which already has had some success, but that could depress revenue growth this year. Indeed, Wall Street analysts see no growth in revenue or earnings per share this year.
That outlook, however, appears discounted in the company’s stock, with Wall Street fearing a steady bleed of broadband subscribers this year.
Moffett remains bullish, arguing that broadband losses “likely have peaked.” He wrote that the stock “looks cheap” valued at 10 times this year’s projected free cash flow and five times estimated 2028 free cash flow.
“Comcast needs to copy Charter’s strategy by marketing cable’s key advantage far more aggressively — a converged wireline/wireless bundle that cannot be offered in most cases by their competitors,” says Jeff Wlodarczak, a Pivotal Research Group analyst. He says it may take some time for the company to demonstrate success with the strategy.
In terms of its other businesses, Comcast highlighted that Peacock operating losses were cut by more than 50%, to $372 million, in the fourth quarter. But Supino noted that the service has lost a cumulative $9 billion, “with no articulated path to profitability.” It serves just 36 million subscribers against 300 million-plus for Netflix. Comcast hasn’t said when it expects Peacock to turn a profit.
The Universal theme parks are underappreciated assets — especially the one in Orlando, Fla., which will be better able to compete with Disney World with the opening of the Epic Universe in the spring at an estimated cost of $6 billion to $7 billion. The Universal parks generated Ebitda of $3 billion in 2024 and could be worth $40 billion or more.
One final area of potential upside is the tantalizing prospect of a merger of Comcast and Charter.
Media mogul and influential Charter investor John Malone said at Liberty Media’s investor day in November that it’s time to allow such a once-unthinkable combination, given growing competition from telecom companies and others in broadband that have depressed cable stocks in recent years.
One benefit of the addition-by-subtraction cable spinoff would be jettisoning President Donald Trump–unfriendly MSNBC from Comcast. That could make Trump antitrust regulators more willing to approve a potential Comcast/Charter deal. The companies have little overlap of their cable and broadband footprints.
Comcast is a rare big company with an inexpensive stock, ample capital returns, and what Wall Street calls optionality, or several ways to win.
Its investors should be in for a satisfying ride.