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This article is part of a series tracking the effects of the COVID-19 pandemic on major businesses, and will be updated. It was originally published on April 8.
Comcast Corp.’s story during the COVID-19 crisis is a tale of two businesses.
First there’s the company’s cable business, which has so far survived its toughest challenge yet as more residential-internet customers cram onto Comcast’s CMCSA, +1.61% broadband network to work and study from home.
Then there’s everything else. The rest of the Comcast conglomerate consists of movie, television and theme-park businesses, all of which are suffering far more as the new coronavirus outbreak disrupts regular operations. In many ways the company’s challenges compare to those of Walt Disney Co. DIS, -0.50% , which faces uncertainty in its entertainment and theme-park units, and AT&T Inc. T, +0.52%, which is balancing more stable telecommunications revenue with some headwinds in media.
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Comcast’s Universal Pictures has delayed film releases as movie theaters across the U.S. have been temporarily closed, and it’s taken the bold step to offer some new recently released titles as digital rentals, bypassing the window that typically exists between when a movie ends its theatrical run and when it becomes available for home viewing.
The company’s film and television units must also contend with production halts, which threaten the availability of new content going forward. The 2020 Tokyo Olympics, a flagship event for Comcast’s NBC network, have been postponed until 2021. And the shaky consumer spending environment has advertisers feeling skittish.
COVID-19 could also cloud over the launch of Comcast’s new Peacock streaming service, which is set to launch July 15 with early availability April 15 for Xfinity customers. People have more time to watch streaming content now that they’re forced to stay home all day, but Peacock will be debuting with an ad-supported tier during a weak marketing climate, and competing against entrenched competition like Netflix Inc. NFLX, -0.53%
Outside the U.S., Comcast has warned of more trouble for Sky, the European pay-TV business it acquired in 2018 after a bidding war against Disney. Sky faced a weak market in Europe even before COVID-19 hit, and the outbreak served to “materially exacerbate” those conditions, Comcast has since cautioned.
The COVID-19 outbreak has also forced the temporary closures of Comcast’s Universal theme parks. It’s unclear when the parks will be able to reopen and how quickly leisure travel will snap back even once they do.
Comcast’s broadband business was a standout even before the COVID-19 crisis hit, and it looks to remain a bright spot as the outbreak unfolds further. While a lack of live-sports programming might prompt more Comcast customers to abandon their video plans, the cord-cutting trend hasn’t been so disastrous for Comcast since the company can recognize higher margins from internet-only subscribers anyway. And broadband plans seem all the more essential with so many employees working from home.
The company also does some wireless business by offering mobile plans to internet subscribers, though Comcast has far less exposure to this category as AT&T, Verizon Communications Inc. VZ, +1.19% , and T-Mobile US Inc. TMUS, -0.13%
There remain many questions facing Comcast as the company navigates the pandemic. Entertainment production and sporting events will eventually return, but it’s still unclear when. People may be hesitant to pack into crowded theme parks right away, and there’s concern about whether the ad dollars migrating away from traditional TV will ever return.
What the numbers are saying
Revenue: First-quarter revenue estimates for Comcast fell to $27.07 billion as of late March from $27.65 billion at the end of 2019, according to FactSet. The bulk of the negative revisions have come for the NBCUniversal segment: Analysts forecast $8.03 billion in revenue, down from $8.51 billion estimated as of late December. Cable estimates have actually increased slightly, while projections for the European Sky business have fallen.
For the full year, analysts modeled $111.95 billion in revenue as of the end of the first quarter, below the consensus forecast of $114.61 billion as of late December. Estimates have come down further since the end of March and more analysts incorporated the Olympic postponement into their models.
Earnings: Profit estimates are down as well. Analysts surveyed by FactSet modeled 70 cents a share in first-quarter as of the end of March, down from a late-December estimate of 81 cents. Analysts’ full-year projections fell to an average $3.01 from $3.35.
Stock movement: Comcast’s stock lost 24% in the first three months of the year, as the S&P 500 SPX, +3.34% fell 20%. Of the 34 analysts surveyed by FactSet who cover Comcast’s stock, 27 analysts rate it a buy and seven rate it a hold. The average price target listed is $47.77.
What the company is saying
March 30: Comcast disclosed in a blog post that it saw a 32% bump in peak traffic over the course of March, including 60% increases in peak traffic in some areas. The same day, an NBC representative told MarketWatch that the network “fully support[s] the new dates chosen for the Tokyo Olympics and Paralympics” by the International Olympic Committee and others.
March 24: The company warned in a filing that the COVID-19 outbreak was pressuring many areas of the business, causing delays in film releases, halts to movie and television production, and theme park closures. The negative effects also “materially exacerbate what was an already deteriorating economic environment and advertising market in the U.K. and Europe in 2019” as it relates to Comcast’s Sky business, and the company cautioned that “economic stress” on residential and business customers could hurt the cable business as well.
All this could have a “material adverse impact” on results, the company said in the filing.
March 12: Universal Studios Hollywood announced on Twitter that it would be temporarily closing on March 14 “out of an abundance of caution.” Universal in Orlando followed suit on March 16. Both parks anticipated reopening in late March but have pushed those dates back to April 19, according to Twitter updates, with the potential for further adjustments.
What analysts are saying
• It’s “hard to find many bright spots” on the NBC side of the business, but elsewhere in the Comcast empire, the broadband segment offers some cushion as the product is “all the more important.” – Wells Fargo analyst Jennifer Fritzsche, in a March 25 note lowering her price target to $37 from $51 but maintaining an overweight rating. She has “incremental concerns” about the company’s advertising business and says Sky is “challenged.”
• “Comcast will likely emerge with new efficiency learnings.” – Credit Suisse analyst Douglas Mitchelson, who said that Comcast is still his top pick, with an outperform rating, though he lowered his target price by a buck to $50 in a March 26 research note. Mitchelson expects a “resilient” broadband business, a full recovery for the parks business by 2022, and an eventual full recovery for the TV advertising market.
• “Looking ahead, theme park revenue may not recover as quickly as most other businesses once restrictions are lifted,” – Goldman Sachs analyst Brett Feldman, citing potential concerns about air travel and large crowds even after quarantine restrictions are lifted. He removed Comcast from Goldman’s “conviction list” in an April 1 note to clients but kept his buy rating on the stock, arguing that Comcast could see a “V-shaped” recovery. He has a $42 price target, down from a prior $50.
• “We do believe that residential broadband will benefit, and consumers will be using more video and streaming services, but this may not drive incremental revenue in the short term, and is unlikely to offset other pressures,” – Raymond James analyst Frank Louthan IV in a March 16 note downgrading Comcast to market perform from outperform.
