Media

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Comcast Corp. is beating on every key measure except one: its own stock price.

Shares of the largest U.S. cable-TV provider trade at an 18 percent discount to analysts' average target level. In fact, the average spread between Comcast shares and analysts' forecasts has been the widest this year in at least 15 years, if not longer.

Great Expectations
Even as Comcast's stock heads for its best annual return since 2013, analysts think it should trade much higher than it has been
Source: Bloomberg

But why?

There's certainly a lot for investors to like about Comcast. How many $150 billion companies are still easily growing revenue at more than 5 percent per year? Its profit has come in above expectations for three periods in a row, including the 92 cents a share it earned in the latest quarter. Yet, the stock fell Wednesday morning after the company released its results.

Comcast's MSNBC network has been riding the U.S. election coverage ratings wave, helping support the NBC division. And impressive gains in cable-TV customers this year mean Comcast doesn't need to get too worked up (for now) about warnings of a coming cord massacre or threats from low-price TV-streaming apps its competitors are launching. In fact, Comcast's new X1 platform is helping it to retain cable customers by allowing them to more easily search for live and on-demand programs and even watch their Netflix shows.

Cord-Mending
Comcast lost a lot of cable-TV customers in 2015, but they're coming back. Grab a cord and hang on!
Source: Bloomberg

While rival AT&T Inc. -- now parent of DirecTV -- moves into content with its ambitious and risky acquisition of Time Warner Inc. to become a mobile-video powerhouse, Comcast is sort of already a step ahead, having bought NBCUniversal years ago to become a vertically integrated content and distribution conglomerate. Plus, it just bought DreamWorks Animation, the studio behind next week's movie release of "Trolls."

Furthermore, in what Wunderlich Securities analyst Matthew Harrigan has called a "Nostradamus-like foresight," Comcast struck an accord in 2011 with Verizon Communications Inc. to someday rent the carrier's network so that it can offer its own wireless service. That day has come. Comcast is activating the deal as it looks to introduce its own Wi-Fi-based mobile-phone service by the middle of 2017. And if that safer approach doesn't work, Comcast could decide it wants to look more like AT&T and acquire a national carrier, in which case T-Mobile US Inc. would be the likely target.

Comcast also increased its dividend by 10 percent this year to $1.10 a share on an annualized basis. That's a total payout of about $1.9 billion so far in 2016, in addition to repurchasing $3.8 billion of stock. Year to date, though, Charter Communications Inc., CBS Corp. and of course takeover target Time Warner are all outperforming Comcast. That said, most other media stocks in the S&P 500 index are down. 

Sharing The Wealth
Bloomberg forecasts Comcast will raise its dividend an additional 11 percent next year to $1.22, or 30.5 cents per quarter
Source: Bloomberg

Perhaps investors fear cord-cutting will soon take its toll on the company. But it hasn't yet, not by a long shot. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net