Is Comcast a Worthwhile Investment?

With shares of Comcast (NASDAQ:CMCSA) trading around $40, 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. The company is able to reach and move large audiences through all of its outlets. As a multimedia giant, look for Comcast to provide the products and services that consumers and companies love.

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T = Technicals on the Stock Chart are Strong

Comcast stock has seen an explosive move higher extending back to early 2009. The stock is currently trading at all-time high prices but may be taking a break here. 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 around its rising key averages which signal neutral to bullish price action in the near-term.

CMCSA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) 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

24.09%

93%

91%

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

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an 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 very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

20%

20.09%

136.4%

35.14%

Revenue Growth (Y-O-Y)

2.90%

5.95%

15.38%

6.13%

Earnings Reaction

1.35%

0.85%

3.3%

3.07%

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

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P = Average Relative Performance Versus Peers and Sector

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

Comcast

DirecTV

Dish Network

Time Warner Cable

Sector

Year-to-Date Return

7.01%

21.82%

4.70%

-2.57%

10.09%

Comcast has been an average performer, year-to-date.

Conclusion

Comcast’s multimedia products span a wide range of outlets that allows the company to move and excite audiences worldwide. The stock has seen an exploding run extending back to early 2009 that has put it at all-time highs. Over the last four quarters, Comcast has seen rising earnings and revenue figures that have kept investors upbeat about the company. Relative to its peers and sector, Comcast has been a year-to-date average performer. Look for Comcast to OUTPERFORM.

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