Comcast drops 4% to new low as cablecos sell off
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Comcast (NASDAQ:CMCSA) has sunk 4% and found a new near-two-year low at the $40/share mark - further fallout from the broadband slowdown that's also hitting rivals.
Its key competitor Charter Communications' stock (CHTR) is -7.9% today and also at a two-year low after its own Q1 beat profit expectations but showed sharply slowing growth in high-speed Internet uptake. And Altice USA (ATUS) has sunk 5.7% to its all-time low off its earnings report yesterday.
(See a chart of these key broadband providers vs. the S&P 500 over the past year here.)
BofA Securities has taken the industry view into account in cutting Comcast to Neutral and trimming its price target to $50 from a previous $67.
Analyst Jessica Reif Ehrlich cites a cavalcade of motivators for the downgrade, notably including the rise of competition in a maturing market. "After years of limited competition, ramping fixed wireless access deployments and accelerating fiber builds present real threats to Comcast's broadband subscriber growth," she says. That competition also affects Comcast's pricing power.
Meanwhile, the U.S. broadband market has "matured significantly," capping industry growth from here, she notes, and Comcast has limited catalysts ahead that could drive the stock higher. That's leaving aside the ongoing drag of video net losses (this quarter's were the highest ever), and the increased investment in Peacock which weighs on NBCUniversal results.
The stock is still relatively attractively valued, but investors will keep focusing on the broadband slowdown until a "clearer picture of the competitive environment emerges."
Comcast and Charter this week agreed to team up against rivals including Roku, Amazon.com and Google on a joint-venture streaming hardware platform.