Macquarie Hikes Comcast Estimates, But Can Company Reclaim Pay TV Throne?

• Shares of Comcast Corporation CMCSA have declined 7.14 percent in the past three months, after having reached a high of $64.50 on July 22.
• Macquarie’s Amy Yong maintained a Neutral rating on the company, while raising the price target from $62 to $65.
• Yong expects Comcast to reclaim its position as the market leader in Pay TV with its focus on maximizing the ARPU per customer, global expansion of the NBCU franchise and prioritizing free cash flow.

Analyst Amy Yong believes that while other companies are "diverting away," Comcast is adding further features to its X1 platform. Average revenue per unit for each customer in Q3 is expected to grow by 3.7 percent, as service and modem fees "flow through."

“We expect there's more to come including more segmentation, over the top service Stream, and in broadband speeds/WiFi, which the average customer accesses 5x/day,” Yong said.

NBC Universal is “crushing” the box office with its global expansion and films such as "Minions," home entertainment version of "Furious 7" and "Jurassic World." Yong expects theatrical to grow 99 percent year-on-year due to the “record box office success and easy comps.”

The Macquarie report also stated that Comcast’s management has spent over $500 million to purchase new media assets, Buzzfeed and Vox. The company also expects to complete the purchase of a 51 percent stake in Universal Studios Japan for US$1.5 billion in November, with plans to eventually fully own this asset.

“This is consistent with their objective to grow their existing franchises to look for opportunities to invest in IP/franchises that have global scale,” Yong wrote.

The EPS estimates for 2015, 2016 and 2017 have been raised from $3.29 to $3.44, $3.81 to $4.04 and $4.29 to $4.47, respectively.