The Comcast Analyst
Mike McCormack downgraded Comcast's stock from Buy to Neutral with no price target (prior target of $48).
The Comcast Thesis
Comcast's NBCUniversal unit has exposure to advertising, theaters and theme parks and these areas will likely face "material headwinds" from the virus followed by a slow recovery. McCormack said the problem for Comcast is these segments represent nearly one-third of all company-wide revenue and one-fifth of total EBITDA.
Meanwhile, Comcast's 2018 acquisition of Sky Holding has large exposure to sports which prompted management to guide second quarter and third quarter EBITDA to be down around 60% year-over-year. While the return of professional sports could come sooner rather than later after encouraging reports of soccer's return in Europe, a full-scale return of live sports remains unclear.
McCormack said the company's Cable Communications business accounts for more than 50% of total company-wide revenue and around 75% of total EBITDA. Encouragingly, this unit's headwinds like accelerated cord-cutting are partially offset by strength in broadband as the need to remain connected gains important.
Bottom line, the "new normal" environment for media and entertainment are likely to result in near-term headwinds while the longer-term picture remains a question mark as it is unclear how consumers will react in a post-COVID-19 environment.
CMCSA Price Action
Shares of Comcast were trading higher by 1% at $38.51.