Comcast Earnings: The Market Overreacts as Muted Seasonality Gives and Takes

Investors cheered last quarter when Comcast CMCSA posted smaller broadband customer losses than typical seasonality would have suggested were likely. The opposite has now occurred as the back-to-school season failed to deliver customer growth during the third quarter. The decline in housing sales has muted typical seasonality, but the broadband market is also clearly more competitive than in years past. We continue to believe broadband competition remains highly rational, however, and that Comcast is well-positioned to maintain market share. Our fair value estimate remains $60.

Comcast lost 18,000 net broadband customers, nearly the same as in the prior quarter and worse than a 19,000 net gain a year ago. The fixed-wireless offerings from Verizon and T-Mobile have been taking nearly all the growth in the broadband industry, jointly adding nearly 1 million customers per quarter since the start of 2022. Comcast also claims it has backed away from heavy promotions, especially aimed at the lower end of the market, to prioritize price over volume. We agree with this move, given our view that fixed-line networks like Comcast’s will prove superior versus fixed-wireless over the long term. We also continue to see good pricing discipline from AT&T, Comcast’s fastest-growing fiber rival.

Revenue in the connectivity segment was roughly flat year over year, as it has been throughout 2023. The shift away from the low-margin television business remains a tailwind, and Comcast continues to show impressive cost control, as the segment EBITDA margin expanded nearly a full percentage point to 41%.

Media segment revenue was also again flat year over year, with growth at Peacock offsetting the decline of the traditional television business. Peacock added 4 million net paying customers during the quarter to reach 28 million. The theme parks business continues to perform very well, with revenue up 17% versus a year ago as attendance in Japan and China rebounds.