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Commentary

Comcast: Good Results, But Shares Too Pricey

Strong cable results, solid box-office receipts, and rapid theme-park growth drove Comcast’s third quarter, writes Morningstar’s Mike Hodel.

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 Comcast’s (CMCSA) (CMCSK) third-quarter results exhibited many of the same themes seen recently: strong cable results, solid box-office receipts, and rapid theme park growth, offset in part by weakness in the core cable television segment. Comcast’s cable performance reinforces our view that its network advantage provides the firm with a wide moat. Our fair value estimate is unchanged, and we view the stock as modestly overvalued.

Comcast’s cable business continues to post impressive results, steadily increasing its customer base at the expense of its phone rivals. The firm added 156,000 net customer relationships during the quarter, up from 82,000 added a year ago. Within the product segments, Comcast lost 48,000 television customers during the quarter, another sharp improvement from the prior year (81,000 net losses), while net Internet-access customer growth accelerated to 320,000, up from 315,000 a year ago, marking the best third-quarter performance since 2009. Deployment of the X1 platform accelerated during the quarter, and about 25% of television customers now use the service, which is far superior to Comcast’s legacy television product. In addition, the firm continues to press its Internet-speed advantage, with nearly three fourths of its customers receiving 50 megabit service or better.

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Michael Hodel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.