KeyBanc On Comcast: Uncertainty, Cheap Valuation Makes This A Buying Opportunity

Comcast Corporation (NASDAQ: CMCSA) boasts a broadband business that's underappreciated by the market to the point where shares are trading at a near five-year low valuation, according to KeyBanc.

The Analyst

KeyBanc Capital Markets' Brandon Nispel assumed coverage of Comcast with an Overweight rating and $38 price target.

The Thesis

Comcast is expected to grow its broadband subscriber base by 4.1 percent in 2018 and 3.6 percent next year, Nispel said in the transferring of coverage note. While the growth rate does fall short of Charter Communications Inc (NASDAQ: CHTR)'s expectations for 4.9 percent growth this year and 4.1 percent next year, the spread between the two is closing as Comcast continues to invest in its network to increase its subscriber passings.

The potential acquisition of either Sky or Twenty-First Century Fox Inc (NASDAQ: FOXA)'s entertainment assets would result in Comcast being a "global media leader" and generate operating efficiencies, the analyst wrote. Instead, a separation of the media and cable business would similarly be viewed as a positive for Comcast as it would be better able to compete in the competitive media landscape.

Comcast's stock is trading at 6.9x on a EV/EBITDA basis, which marks its lowest level in years and "barely represents a premium" compared to AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). Nispel said Comcast should be able to grow its revenue by 2 to 5 percent and EBITDA by 3 to 5 percent in the next two years compared to AT&T and Verizon's growth rates of flat and 1.0 percent, respectively.

Price Action

Shares of Comcast closed Thursday at $32.41.

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