Comcast Stock Price Drop: What the CFO Said That Spooked the Market

A company the size of Comcast, with 179,000 workers, a market capitalization of almost $90 billion, theme parks, and broadcast networks under its control, losing almost 7% of its stock value in a single trading session is almost ironic. However, that is precisely what transpired on Wednesday, September 10th, when CFO Jason Armstrong spoke at the Goldman Sachs Communacopia + Technology conference and essentially stated that the situation isn’t as stable as investors had anticipated.

Armstrong did not deliver a catastrophe. He delivered something that could be worse for markets: cautious vagueness. He admitted that broadband would continue to lose customers this year, which is the aspect of Comcast’s business that the majority of investors are silently watching with concern. He predicted that the losses would decrease. However, the word “narrow” does not imply “stop,” and traders are quick to read between the lines.

Comcast shares had lost nearly 7% of their value by the end of trading. Even in a market accustomed to volatility, this kind of one-day decline draws attention.

Although the broadband issue is not new, it is getting more difficult to overlook. For many years, Comcast’s cable internet division practically had a monopoly in the regions it served. Because there was no viable alternative, people had to pay. Silently, that dynamic has been deteriorating. Verizon and T-Mobile now offer more fixed wireless access. Competitors‘ fiber buildouts have accelerated. Additionally, once a household changes internet providers, they hardly ever change again. In this industry, the churn is usually ongoing.

Comcast’s current structural change is what makes this especially uncomfortable for the company. A significant portion of its traditional cable TV networks, including USA Network, CNBC, and others, were spun off earlier this year to form Versant Media Group. Considering how quickly linear TV is disappearing, that decision made strategic sense. However, it also eliminated some diversity. There are basically two parts left: NBCUniversal on one side and broadband and telecom on the other. Additionally, those two components will soon split apart, with NBCUniversal expected to become a separate business sometime in the middle of the upcoming year.

Some analysts believe that while the spin-off logic is sound, the timing is crucial. Peacock, the streaming service, finally turned adjusted EBITDA-positive for the first time, which is a real milestone worth recognizing. NBCUniversal has its captivating moments. The theme parks at Universal Studios continue to be popular attractions. An already tense trading session was further complicated by Armstrong’s admission of softness in the Universal Studios business.

The stock chart’s numbers provide a more comprehensive narrative. The 52-week high for Comcast is $32.86. Shares were trading close to $24.88 as of mid-September. That is a significant difference, about 24% below the peak. The stock has lost between 15 and 16 percent so far this year, depending on the day. The decline in Comcast’s stock price is not limited to Wednesdays. The retreat has been grinding and slow.

Some of this may be causing the market to overreact. The company reported $1.04 per share in Q2, exceeding forecasts of $0.97. At $29.94 billion, revenue exceeded analyst projections. Institutional ownership is still high at over 84%, and the dividend is still in place at $0.33 per quarter, yielding about 5.2%. The average analyst price target is close to $32.96, suggesting a significant increase from present levels. However, a consensus “Hold” rating is hardly a call to action.

It’s still unclear if competition will continue to eat away at a business that Comcast is betting its legacy future on, or if the broadband subscriber losses will bottom out sooner than Armstrong suggested. It is evident that the company is undergoing a major reorganization in an effort to shed the burden of outdated media while retaining the aspects of its operations that continue to produce actual revenue.

Investors don’t seem to be wondering if Comcast will survive. It will. The question is whether Comcast will become a smaller company or a better one as a result of all these spin-offs and strategic reviews.