Will Comcast Resume Its Uptrend?

With shares of Comcast (NASDAQ:CMCSA) trading around $47, is CMCSA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Comcast is a provider of entertainment, information, and communications products and services. The company operates in five segments: cable communications, cable networks, broadcast television, filmed entertainment, and theme parks. Comcast offers television, video, high-speed Internet, and voice services to residential and business customers. It also operates NBC and Telemundo broadcast networks; provides filmed entertainment under the Universal Pictures, Focus Features, and Illumination names; and operates theme parks, studios, and a dining, retail, and entertainment complex.

Comcast recently reported results for the quarter ended September 30. Brian L. Roberts, chairman and CEO, said: “Our businesses generated strong revenue and cash flow growth and record free cash flow for the third quarter. Cable’s results highlight the underlying strength of our residential and business services. We are driving innovation, expanding our service offerings, and bringing new and rich content to more platforms than ever before. NBCUniversal delivered solid performance in every one of its segments, with healthy growth in revenue and double-digit cash flow growth, adjusting for the results of the Olympics last year. Comcast NBCUniversal has real momentum and many opportunities ahead.”

T = Technicals on the Stock Chart Are Strong

Comcast stock has been trending higher over the past few quarters. The stock is currently trading at all-time highs. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Comcast is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

CMCSA

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Comcast options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Comcast Options

21.62%

6%

4%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

November Options

Flat

Average

December Options

Flat

Average

As of Wednesday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Increasing Quarter Over Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Comcast’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Comcast look like and, more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-16.67%

30%

20%

20.09%

Revenue Growth (Y-O-Y)

-2.38%

6.96%

2.9%

5.95%

Earnings Reaction

-0.99%*

5.54%

1.35%

0.85%

Comcast has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Comcast’s recent earnings announcements.

*As of this writing.

P = Excellent Relative Performance Versus Peers and Sector

How has Comcast stock done relative to its peers – Time Warner Cable (NYSE:TWC), DirecTV (NASDAQ:DTV), and Dish Network (

target=”_blank”>NASDAQ:DISH

) — and sector?

Comcast

Time Warner Cable

DirecTV

Dish Network

Sector

Year-to-Date Return

26.26%

20.26%

25.28%

33.96%

27.36%

Comcast has been a relative performance leader, year to date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The company recently released its third-quarter earnings, which left investors extremely happy. The stock has been trending higher over the past few quarters and is currently trading at all-time highs. Over the last four quarters, earnings and revenues have been increasing, which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Comcast has been a year-to-date performance leader. Look for Comcast to OUTPERFORM.

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