Is Comcast Enticing After Recent Headlines?

With shares of Comcast (NASDAQ:CMCSA) trading around $50, 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.

Shares of Comcast edged higher in early trading on Tuesday after the tech and media giant reported strong first-quarter results. Revenue of $17.4 billion, up 13.7 percent on the year, was higher than the mean analyst estimate of $17.04 billion, while adjusted earnings of 71 cents per share, up 31.5 percent on the year, beat the mean analyst estimate of 64 cents. Unadjusted earnings of 68 cents per share were up 33.5 percent on the year. Significantly, video customers increased by 24,000 in the first quarter, the second consecutive month of growth and a sign that Netflix (NASDAQ:NFLX) hasn’t quite taken over the world just yet.

T = Technicals on the Stock Chart Are Mixed

Comcast stock has been pulling back in recent times. However, the stock is currently surging higher and looks set to continue this path. 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 between its rising key averages, which signals neutral 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

18.91%

0%

0%

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

Put IV Skew

Call IV Skew

May Options

Average

Average

June Options

Average

Average

As of Tuesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral 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?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

31.48%

27.92%

-16.67%

30%

Revenue Growth (Y-O-Y)

13.70%

6.21%

-2.38%

6.96%

Earnings Reaction

2.95%*

1.63%

-1.29%

5.54%

*As of this writing.

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

P = Weak 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 (NASDAQ:DISH) — and sector?

Comcast

Time Warner Cable

DirecTV

Dish Network

Sector

Year-to-Date Return

-1.2%

3.25%

11.57%

3.14%

5.19%

Comcast has been a poor relative performer, year-to-date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The company reported first-quarter earnings on Tuesday that left investors pleased. The stock has been pulling back in recent times but is currently surging higher. Over the last four quarters, earnings and revenues have been on the rise. Relative to its peers and sector, Comcast has been a weak year-to-date performer. WAIT AND SEE what Comcast does this quarter.

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