Analyst Note| Michael Hodel, CFA |
Nelson Peltz’s Trian Fund Management has taken a stake in Comcast, stating that it believes Comcast shares are undervalued and that it is having conversations with the company. While the move doesn’t alter our view of the firm, we believe it highlights a valuation disconnect that emerged in recent months between Comcast and pure-play cable peer Charter Communications. Charter shares have gained nearly 30% year to date, while Comcast has barely budged. Charter shares now sit at a 30% premium versus our fair value estimate, while Comcast trades at a small discount. We continue to believe that Comcast shares are the most attractive among cable firms. For investors looking for a highly leveraged pure-play cable stock, we would choose Altice USA over Charter at current valuations.