Stagnant Broadband Growth And Rising Costs Will Erode Valuation

Key Takeaways

• Broadband and legacy media revenues are under pressure from market saturation, cord-cutting, digital ad shifts, and fierce competition in offerings and pricing.
  
• Rising costs, heavy capital spending, and regulatory risks threaten margins, growth prospects, and shareholder returns as Comcast pivots amid industry disruption.
  
• Strategic broadband investments, digital media expansion, and disciplined capital allocation underpin Comcast's growth, earnings stability, and ability to adapt while enhancing shareholder returns.

Catalysts

Operates as a media and technology company worldwide.

• Stagnant broadband growth remains a serious risk as the US market for broadband is reaching saturation, with slowing population growth and minimal expansion in addressable households. Ongoing competitive pressure from fiber and fixed wireless offerings, as well as price-based competition, threatens to cap subscriber additions and force downward pressure on broadband average revenue per user, leading to persistently flat or declining broadband revenues and weakening the company's single largest earnings engine over the long term.
  
• Persistent decline in pay-TV and traditional media subscribers due to widespread cord-cutting is eroding high-margin legacy video revenues, forcing Comcast to aggressively pivot towards lower-margin streaming services. As advertising dollars continue to migrate toward dominant digital platforms like Google and Meta, there is further risk of prolonged declines in NBCUniversal's ad-driven earnings, directly compressing net margins and EBIT for the media segment.
  
• Intensifying competition for premium video content rights and talent from deep-pocketed tech and media rivals is fueling a dramatic rise in programming and production costs for both traditional TV and streaming platforms. This, combined with mounting sports rights expenses-notably the NBA's new contract-will result in significant margin compression and escalating risks of negative earnings surprises in the next several years, particularly if Peacock subscriber growth underdelivers.
  
• High and sustained capital expenditure requirements will persist as Comcast races to keep pace with ongoing technological shifts like fiber upgrades and DOCSIS 4.0 deployment, while simultaneously investing in new theme parks and upgrading existing assets. These capital intensity demands may constrain free cash flow, pressure leverage ratios, and limit the company's ability to return capital to shareholders, especially in periods of operating softness.
  
• Regulatory headwinds are mounting globally, with increased scrutiny on broadband market practices, vertical integration, and content ownership. The risk of stricter antitrust regulation, price controls, or forced asset divestitures is growing, threatening to limit Comcast's pricing flexibility, restrict strategic M&A, and ultimately put a structural ceiling on organic revenue and earnings growth looking ahead.

Comcast Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Comcast compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Comcast's revenue will decrease by 0.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 18.4% today to 9.2% in 3 years time.
• The bearish analysts expect earnings to reach $11.4 billion (and earnings per share of $3.71) by about August 2028, down from $22.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 11.0x on those 2028 earnings, up from 5.1x today. This future PE is lower than the current PE for the US Media industry at 20.7x.
• Analysts expect the number of shares outstanding to decline by 4.66% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.31%, as per the Simply Wall St company report.

Comcast Future Earnings Per Share Growth

Risks

• Strategic investments in broadband infrastructure, next-generation technologies such as DOCSIS 4.0, and extensive network upgrades position Comcast to maintain or grow its broadband market share, supporting sustained revenue and net margin expansion over time.
  
• The strong performance and ongoing expansion of high-growth businesses like Universal Parks (including Epic Universe), Peacock streaming, and the studios business collectively account for a growing majority of revenues and provide new recurring income streams, improving top-line growth and earnings stability.
  
• The successful rollout of holistic go-to-market strategies-including longer-term price guarantees, bundled premium wireless offerings, nationalized pricing, and improved digital experiences-are already showing early signs of reducing churn, raising ARPU, and increasing wireless penetration, which can bolster future revenues and net profit.
  
• The media segment's pivot toward digital, highlighted by double-digit revenue growth at Peacock, major content wins (NBA rights, Olympics, Super Bowl), and strong advertising upfronts, reflects an ability to adapt to secular streaming and digital consumption trends, supporting future revenue and EBITDA growth.
  
• A combination of robust free cash flow generation, capital allocation discipline (including significant buybacks and dividend payouts), and new legislative tailwinds (such as cash tax benefits from U.S. infrastructure investments) provides Comcast with ample financial flexibility to continue investing in growth initiatives while enhancing shareholder returns, ultimately supporting long-term earnings.

Valuation

• The assumed bearish price target for Comcast is $31.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Comcast's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $31.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $124.3 billion, earnings will come to $11.4 billion, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 8.3%.
  
• Given the current share price of $31.67, the bearish analyst price target of $31.0 is 2.2% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that the bearish analysts believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.