Nomura Instinkt analyst Jeffrey Kvaal has downgraded Comcast to neutral on what he said will be a “narrowing runway” of reduced broadband customer growth and increased OTT competition.
Comcast’s growth in high-speed internet customers “may narrow as a decline in DSL subscribers, rising fiber competition from telco rivals and wireless technologies, such as LTE Advanced and 5G, emerge,” Kvaal said in a note to investors last week.
On the pay TV side, meanwhile, Comcast will face even more over-the-top competition, with T-Mobile and Verizon readying new streaming alternatives.
"We consider the proliferation of aggressively priced—if often limited—over the top competition likely to intensify in 2018. AT&T, T-Mobile and Sprint have bundled video with mobile to reduce churn; Verizon should launch a bundled over the top service shortly,” Kvaal added.
While U.S. cable operators seized market share in the third quarter in the area of broadband service, their rate of customer growth slowed by nearly 31%.
The biggest decliner was Comcast, which added 329,000 HSI customers in third-quarter 2016 vs. just 213,000 in third-quarter 2017. Comcast added 1.372 million HSI users in 2016.
Kvaal was more bullish on Comcast’s NBCUniversal division with approach of the Winter Olympics, however.
"While last year was impacted by a tough comp with the 2016 Summer Olympics, Comcast had its biggest ever upfront with inventory sold up 8 percent year over year," Kvaal said. "We expect broadcast advertising revenue to increase 22 percent in fiscal year 2018 as NBC has both the Super Bowl and the Olympics coming up in the first quarter. NBC executive recently forecasted $1.4 billion in additional revenue for the Olympics and Super Bowl."