Will shares in Comcast and other cable TV stocks find a bottom with second-quarter earnings reports? Comcast stock has retreated 15% in 2024 and that's the best performance of publicly traded cable TV companies.
Charter Communications has tumbled 25% in 2024 while Cable One and Altice USA are down more than 40%. Despite gains in the wireless phone market, cable TV companies have been punished for broadband subscriber losses — a trend that doesn't appear to be reversing anytime soon.
Further, Comcast kicks off earnings for cable TV stocks on July 23. Broadband subscriber losses are expected to continue in the June quarter, which is typically seasonally weak. For example, analysts polled by FactSet estimate that Comcast will lose 143,000 broadband subscribers versus a 19,000 subscriber loss in the year earlier period.
Cable TV Stocks: FWA Competition
One problem for cable TV stocks is the emergence of competition from "FWA," for fixed wireless access, services. T-Mobile US and Verizon Communications, in particular, are ramping up FWA services to homes and businesses using radio spectrum acquired for "5G wireless" services.
Goldman Sachs analyst James Schneider in a recent report gave this perspective on the broadband market.
"Between 2015 until 2022, Charter and Comcast were each adding over 200,000 subscribers per quarter," he said. "This trend has now reversed itself with Comcast losing subscribers for five of the past six quarters and Charter losing subscribers in the past two quarters."
Schneider added: "We believe fixed wireless access will continue to gain traction as a credible offering in the low-to-mid range portion of the market, and think the runway for FWA subscriber growth could be longer than the market expects."
Meanwhile, Verizon reports Q2 results on July 22 followed by AT&T on July 24. T-Mobile, which reports Q2 earnings on July 31, aims to sign up 7 million to 8 million 5G fixed broadband subscribers by 2025, with services available to about 40 million US. households.
AT&T And Google Expand Fiber Build-Outs
Verizon is targeting 4 million to 5 million 5G fixed broadband customers by 2025. It aims to reach 50 million U.S. households.
5G wireless broadband competition isn't the only problem for cable TV stocks. AT&T and other landline phone companies are building out more fiber-optic broadband services to homes. After a hiatus, Alphabet's G Fiber services are also expanding.
In addition, federal subsidies for low income households are ending. So analysts expect more consumers to switch service providers.
"The broadband market remains challenging," said Bank of America analyst Jessica Reif Ehrlich in a recent report. "Indeed, fixed wireless access offerings are still ramping, fiber buildouts remain relatively steady, ACP subsidies ended in mid-May, broadband residential penetration is reaching saturation and competition for commercial subs has grown more difficult. With that backdrop, CMCSA management has been clear they do not see sub trends improving in the near-term."
Comcast Stock: Theme Park Boost?
Also, Comcast aims to stem broadband losses with bundled services offers that offer wireless or streaming content, such as Apple TV and Netflix and in-house Peacock.
In addition, Comcast stock has other growth drivers, including the theme park business, which is expanding. Also, Walt Disney is expected to buy out Comcast's Hulu stake. However, the company's have been unable to agree on valuation.
At Raymond James, analyst Frank Louthan is cautious. "We expect Comcast to remain at a lower valuation for some time as a more difficult competitive environment is expected to persist, keeping cable multiples depressed," he said in a report.
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