Comcast Is A Top Pick For Morgan Stanley In '16

• Comcast Corporation CMCSA shares have been under pressure over the past month, and are down 10 percent since November 23.
• Morgan Stanley’s Benjamin Swinburne maintained an Overweight rating on the company, with a price target of $70.
• Despite healthy EBITDA growth, Comcast’s shares have been broadly flat since early 2014, Swinburne stated.

Although there have been cable network sub losses of around 1-2 percent per year, these have been mainly due to cord-shaving, and not cord-cutting, analyst Benjamin Swinburne said. He added that cord-shaving was a direct result of the endeavors to better serve the more price sensitive and OTT customers.

Swinburne believes that Comcast could gain share from competitors by using the skinny bundles, since the company has “the best broadband pipe into the home and the video platform to differentiate its video offering from other providers.” Comcast may actually add net video subscribers in 2016, for the first time since 2006.

Comcast has been able to add approximately 1M customers between 2013 and 2015. Swinburne wrote, “Our view is that broadband alone is not the killer app, but rather the combination of a high quality broadband service and a powerful video platform that is key.” This has resulted in 1-2 percent customer growth and 3-4 percent ARPU growth, and this should continue to support more than 5 percent EBITDA growth at Comcast Cable.

Since early 2014, Comcast’s shares are roughly flat. This is despite the company generating 7-8 percent EBITDA growing per year over the past two years. Swinburne expects Comcast to achieve 10-12 percent EPS growth in 2016, backed by continued share gains with its video/broadband product offering.