Comcast Is Downbeat About Broadband Subscriber Growth. Cable Stocks Are Falling.

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Comcast sells its cable service under the Xfinity brand.

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David Paul Morris/Businesshala

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Cable stocks are falling after a Comcast executive warned that the company won’t sign up as many customers for its broadband Internet service this quarter as Wall Street had hoped.

Comcast stock (ticker: CMCSA) was down nearly 6% in afternoon trading on Tuesday, with Charter Communications (CHTR) down more than 4%, and Altis USA (ATUS) down 3.7%.

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Speaking virtually at UBS’s Global TMT conference on Tuesday, David Watson, president and CEO of Comcast’s cable unit, said the company will end 2021 with about 1.3 million broadband customers, compared to about 2 million in 2020. Is.

In the first three quarters, Comcast added 1.1 million net subscribers, so that figure puts the net broadband subscriber addition of less than 200,000 in the current quarter. That would make the fourth quarter the worst since at least 2019 on that front. The average estimate on Wall Street was for 311,000 net additions.

Watson also said that cable segment earnings before interest, taxes, depreciation, and amortization—or EBITDA—will be up 7% to 8% year over year in the fourth quarter. That compares with analysts’ consensus for growth of about 5%, but investors didn’t pay attention to that on Tuesday.

Subscriber additions are a closely watched metric for telecom investors because they bring in recurring revenue and allow operators to spread the huge fixed costs of their networks to more users. The number of US cable-industry subscribers has slowed in 2021 versus 2020, when the pandemic prompted Americans to upgrade their Internet services to work and entertain at home.

Comcast’s remarks on Tuesday suggest the trend isn’t taking off, fueling bears’ concerns about increased competition in the industry — it appears that everyone is laying out new fiber, and wireless networks are only Intensifying – and a post-Covid hangover.

However, cable bulls are optimistic about the slow subscriber growth. Companies can still increase their earnings by raising prices, selling more products and services to existing customers, and reducing the required continuous network spending as a percentage of revenue, a shift that analysts refer to as a “decline in capital intensity”. it happens.

The valuations of cable stocks have fallen after their disappointing performance this year, adding to their appeal among investors considering the stock. Comcast stock was down 4.5% through Monday’s close in 2021 after dividends, versus a 24% return for the S&P 500. Charter stock was down about 3% this year and Altice was down 56%.

Comcast sells its cable services under the Xfinity brand name. NBCUniversal and Sky have rounded out the rest of Comcast’s portfolio.

This isn’t the first time in recent months that a Comcast executive’s warning on current-quarter subscriber growth has affected stocks in the sector. The company’s CFO, Michael Cavanagh, shocked Wall Street in mid-September with news that customer growth in the third quarter would be lower year over year.

write to [email protected] . on Nicholas Jasinski

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