Will Comcast Continue To Explode?

With shares of Comcast (NASDAQ:CMCSA) trading around $41, 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. Through its segments, Comcast offers video, high-speed Internet, and voice services to residential and business customers; national cable entertainment, news, sports, and regional sports and news; operates NBC and Telemundo broadcast networks; produces, acquires, markets, and distributes filmed entertainment under the Universal Pictures, Focus Features, and Illumination name; and operates theme parks, studios, and a dining, retail, and entertainment complex. Comcast is able to reach and move audiences through a wide range of outlets so look for profits to continue into the future.

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T = Technicals on the Stock Chart are Strong

Comcast stock was not seeing much movement over the last ten years. However, just last year, the stock went on to break this multi-year range and has soared higher. 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 risking key averages which signal 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

24.91%

93%

89%

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

May Options

Average

Average

June Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very significant 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?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

19.57%

136.36%

35.14%

32.35%

Revenue Growth (Y-O-Y)

5.98%

15.34%

6.14%

22.67%

Earnings Reaction

0.85%

3.3%

3.07%

-0.58%

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

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P = Excellent 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

10.71%

10.47%

2.03%

-4.12%

9.78%

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

Conclusion

Comcast is a media giant that provides goods and services to consumers and businesses across the globe. The stock has seen an amazing run the last couple of years and looks to be headed higher. Investors have been pleased as earnings and revenue figures have been increasing. Relative to its peers and sector, Comcast has led in year-to-date performance. Look for Comcast to continue to OUTPERFORM.

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