Credit Suisse Upgrades 'Well-Positioned' Comcast After Q3 Beat

Comcast Corp. CMCSA reported third-quarter earnings Thursday that exceeded estimates across the board.

The cable company posted EPS of 65 cents against expectations of 61 cents. Revenue totaled $22.135 billion, beating the expected $21.819 billion.

The Analyst

Credit Suisse analyst Douglas Mitchelson upgraded Comcast from Neutral to Outperform and raised the price target from $36 to $44.

The Thesis

Broadband net additions and the surge in marketing for the company’s Gigabit service give Mitchelson increased confidence for the fourth quarter, the analyst said in the upgrade note. (See his track record here.)

“Given its broadband competitive advantages and natural programming cost hedge (owning 25 percent of pay TV and 25 percent of media), we believe Comcast is well-positioned to sustain mid-single digit revenue growth and modest margin expansion the next several years [and] even before any Sky synergies, we expect moderating capital intensity.”

The broadband additions also provide pricing upside, as Comcast has invested substantially in product innovation, Mitchelson said.  

Market share, pricing and market upside help leverage Comcast's strong competitive positioning, he said. 

“Further, we see the potential for capital intensity to moderate meaningfully over time as investments are leveraged and video intensity moderates.”

The company’s conservative view toward debt demonstrates that leverage in the market is reasonable, the analyst said. 

Price Action

Comcast shares were down 1 percent at $35.48 at the time of publication Friday. 

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