Analysts at investment firm Macquarie Research see Comcast’s first-quarter video revenue dipping by 0.7% due to lower net video adds and ARPU.
“We believe [Comcast] shares are stuck between secular headwinds facing its video business, which will likely result in a round of downward estimate revisions, and uncertainty around its interest in Sky,” the firm wrote in an April 1 report.
The nation’s largest cable operator has offered $31 billion to acquire Sky, attempting to scuttle a previous deal between the British satellite provider and 21st Century Fox. Macquarie has called the move, which sparked a regulatory race between the two media giants, ambitious but risky and downgraded its recommendation on Comcast stock from outperform to neutral in late February after the bid. Its latest note kept the neutral rating but lowered its 12-month price target on the stock to $38 from $42.
Macquarie said it anticipates first-quarter video losses of 77,000. It sees full-year video net losses of 376,000, reflecting a slight improvement in 3Q/4Q.
Macquarie also expects that headwinds facing the industry-leading Comcast will likely impact peers including AT&T/DirecTV, Altice, Frontier, CenturyLink and WOW. (Only Charter got a pass: "We are optimistic that OP-rated Charter will continue its turnaround and improve churn/retention across legacy Time Warner.”)
On the upside, Macquarie called Comcast’s high-speed internet business “solid with a long runway for growth,” noting that 75% of customers take 100Mbps+ and 80% of its footprint is 1 Gig enabled. It sees 367k/1.1m broadband net adds for the first quarter of 2018.
The investment firm anticipates cable margin expansion of 50 basis points in 2018 driven by programming cost growth of 6.3%, tech ops growth of 3.1% and customer service growth of -2%. It’s predicting Q1 cable EBITDA of $5.4 billion and margins of 39.8%.