Will Comcast Resume Its Uptrend?

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. 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 and retain the products and services that consumers and companies love.

T = Technicals on the Stock Chart Are Mixed

Comcast stock has been trending higher over the past few quarters. The stock is now trading sideways as it digests gains from a recent bullish run. 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 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

22.94%

73%

72%

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

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of Monday, 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 significant 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 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

30.00%

20.00%

20.09%

136.40%

Revenue Growth (Y-O-Y)

6.96%

2.90%

5.95%

15.38%

Earnings Reaction

5.54%

1.35%

0.85%

3.30%

Comcast has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been happy 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

10.92%

11.48%

14.73%

24.09%

13.82%

Comcast has been a weak relative performer, year to date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. The stock has been moving higher over recent quarters but is now trading sideways as it digests recent gains. Over the past four quarters, earnings and revenues have been rising, which has led to happy investors in the company. Relative to its peers and sector, Comcast has been a weak year-to-date performer. WAIT AND SEE what Comcast does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.