For several years, Comcast (NASDAQ: CMCSA) was considered one of the most successful companies in America. It used its cable franchise to build a huge broadband, VOD, and VoIP cash machine. The so-called "triple play" of voice, TV, and broadband could not be matched by telecom competitors, so Comcast took hundreds of thousands of phone customers away from them each quarter.
From mid-2003 to early 2007, Comcast shares rose close to 100%. During the last three months, they are down 27%.
It finally occurred to Wall Street that competition from satellite TV and the new fiber-to-the-home products from telecom companies like Verizon (NYSE:VZ) were eating into Comcast's customer base. The company recently announced that its growth and cash flow would be less than expected. Customer growth was slowing and the firm had to put more money into infrastructure so that it could improve offerings for products like HDTV.
An influential cable analyst, Benjamin Swinburne of Morgan Stanley, says the slide in Comcast shares is over. According to Barron's the analyst "notes that the stock's multiples have been compressed to historic lows." He also thinks EPS and free cash flow could grow as much as 20% a year, if Comcast can keep adding voice and HDTV customers.
The logic for Comcast making a comeback may be a little thin. Verizon's FiOS is taking customers from Comcast and it is only in a small fraction of the 18 million homes that will eventually have access to the service.That means that the head-to-head competition for the cable company will actually increase. And satellite TV companies continue to ramp up their programming and HDTV offering.
The worst is probably not over for Comcast.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-07-2007 @ 1:51PM
Barfamaduk said...
Not to mention the illegal throttling of applications on their network. Not to mention their horrible customer service. Not to mention the fact that the only reason they have had as much success as they had is that there is a legal framework in place that stifles competition and gives the consumer very few choices all worse than each other.
12-07-2007 @ 7:09PM
Mark said...
well well well so comcast who keeps saying they have a fiber network is being beaten down by a true fiber to the home network????? maybe they should tell the truth and note that most of there network is still 1 thick peace of copper!!!!!
12-07-2007 @ 9:54PM
e hurley said...
Every time I receive a new bill they are nickel and dime me to death. Also some changes have been made that I lose channels. Considering shifting to Verison.
2-22-2008 @ 10:07PM
Fishndad42 said...
Comcast loses customers wherever they have competition. There are still many communities where they are a monopoly and have no competition - in those communities, they continue to reduce services and raise prices to fund the competitive upgrades in communities where competition is thumping them. Hopefully the lawmakers in those communities will open the door to competition, at which time Comcast may struggle to find any hostage pockets left to rob to fund their comeback.