Bullish Comcast Analyst Models For A 33% Upside

It’s a challenging world for cable and satellite companies, but one Wall Street analyst said investors are a bit too negative on the outlook for Comcast Corporation (NASDAQ: CMCSA).

The Analyst

Buckingham Research Group analyst Matthew Harrigan initiated coverage of Comcast with a Buy rating and $48 price target. 

The Thesis

Comcast has a lot of good things going for it and its stock is relatively cheap at the moment, Harrigan said. (See Harrigan's track record here.) 

Comcast’s cable TV, technology and content assets are unparalleled in the media market, the analyst said. 

Investors concerned about cord-cutting have put pressure on Comcast stock, but Harrgan estimates the company will lose only about 6 percent of its current video customer base through 2021. At the same time, Buckingham values Comcast’s cable business at $186 billion and NBCUniversal at $91 billion. The firm’s $48 price target is based on a conservative 9.0x multiple on estimated operating cash flow.

At the same time Comcast is losing customers, Harrigan said it will gain cash flow from its cable business at a compound annual rate of 4.7 percent.

“Given Comcast’s huge customer base, pricing should take precedence over mild volume changes,” he said.

Comcast’s reported interest in acquiring assets from Twenty-First Century Fox Inc (NASDAQ: FOXA) is a wild card and potential catalyst for the stock in the near term. Harrigan estimates these assets could generate nearly $3.8 billion in 2018 EBITDA.

From a capital return perspective, Buckingham is calling for 12 percent share retirement through 2021 and continued dividend payments.

Price Action

Comcast shares were trading higher by 1.59 percent at the time of publication. 

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Photo courtesy of Comcast.