What’s Next For Comcast Stock?

Comcast Corporation (Nasdaq: CMCSA) waited less than 24 hours to outbid Twenty-First Century Fox (FOXA) for British media giant Sky. Analysts are now watching to see if Comcast will take a similarly aggressive approach and once again outbid Walt Disney Co. (DIS) for Fox.

On Wednesday morning, Fox outbid Comcast by offering $32.5 billion for Sky. Later in the evening, Comcast retaliated by raising its bid to $34 billion.

Both Comcast and Disney are on the hunt for acquisitions that could help boost content for their respective over-the-top streaming services. Comcast launched its Xfinity Instant TV streaming service last September, and Disney is planning to launch its highly anticipated streaming service next year.

While Fox and Comcast have been trading bids on Sky, Disney and Comcast have been raising the stakes for Fox. Disney has the highest offer of $71.3 billion for the majority of Fox’s TV and movie studio assets.

Credit Suisse analyst Doug Mitchelson says Comcast’s core business growth is slowing, but it still has plenty of cash flow. Management is now facing the tough decision of whether or not to risk that cash flow on acquisitions or help support its stock by beefing up buybacks and dividends.

“Cable revenue growth has already slowed to sub-4 percent, and we expect these pressures will only continue or worsen in the coming few years,” Mitchelson says.

“It also appears Comcast is entering a new investment phase given its launch of wireless service and pursuit of M&A, suggesting investors cannot rely on return of capital for support as top-line growth slows.”

Mitchelson says CMCSA stock appears cheap compared to its historical valuation, but he sees limited opportunity for earnings multiple expansion until investors see a clear path to long-term revenue growth. It seems as if Comcast sees Sky as a potential solution to its growth problem.

CFRA analyst Tuna Amobi says investors shouldn’t rule out another bid for Fox as well.

“While DIS may have regained some edge in the two-horse race for the highly coveted Fox entertainment assets, we think Comcast could come back with a sweetened all-cash proposal,” Amobi says.

Fox shareholders are scheduled to vote on the Disney buyout on July 27.

Credit Suisse has…

Click here to continue reading

Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!