Down more than 36% since last year, the stock of Comcast (CMCSA +1.05%) has had a rough 12 months. The company reported disappointing second-quarter results at the end of July, and its stock has only continued to tumble. But the company has some exciting developments in the works that could turn things around.
A rough second quarter
From July 27 to July 29, Comcast's stock fell 13.4% after the company posted underperforming second-quarter earnings. The quarter was the first time the company gained no new broadband subscribers, with a net loss of 10,000 residential subscribers offsetting its gain of 10,000 business broadband members.
The stagnant subscriber numbers seemed even worse in light of previous projections that Comcast would add 84,000 subscribers over the quarter.
And the company's cable business continues to sour, losing 500,000 subscribers in the quarter. Not even Peacock, Comcast's streaming service, could save the day since its paid subscriber numbers over the quarter remained at 13 million.
The bright spot in Comcast's second quarter was the company's entertainment segment, which includes studios and theme parks. That segment contributed to overall revenue growth of 5% to just over $30 billion, and adjusted net income increased by 14% to $4.5 billion. In particular, the NBCUniversal segment increased its revenue by 18.7% to $9.45 billion.
Comcast had a problematic second quarter, brought down significantly by its cable and broadband segments. However, the company is making strides to pivot its business toward more profitable and future-proof endeavors.
A move in the right direction
Like most cable providers, Comcast has been hit hard by the rise of streaming. The company has increasingly lost cable subscribers for four straight quarters as cord-cutting rises and consumers opt for streaming services.
The company has doubled down on its streaming service as it attempts to shift its strategy toward a more-reliable business than cable. Peacock is already home to popular sitcoms such as The Office and Parks and Recreation. And it is branching out into two lucrative forms of content: popular film franchises and sports.
On Aug. 17, Lions Gate inked a deal with Peacock to stream a John Wick prequel series. The upcoming show will premiere exclusively on Peacock in 2023 and launch alongside the entire film series. The John Wick trilogy has grossed almost $600 million worldwide, with the new show seeing Comcast take a page out of Disney's (DIS +2.42%) book with how it has grown Disney+ into a streaming titan.
Disney reported 152.1 million Disney+ subscribers in its fiscal third quarter of 2022, a 10.4% rise from the previous quarter. The company has seen tremendous growth in the streaming industry, largely thanks to its strategy of expanding popular franchises such as Star Wars and Marvel. Disney has developed multiple miniseries exclusive to Disney+ that have pulled in millions of fans of its popular brands. Comcast's strategy to do the same with John Wick is a positive move. The next installment, John Wick: Chapter Four, will be released in March 2023, and if it reignites hype for the franchise, it will create excitement for the Peacock series.
Comcast has steadily increased sports on Peacock. Live sports continue to be one of the leading reasons consumers keep their cable subscriptions, so the move is aimed at attracting cord-cutters. In 2022, the company has Big Ten college football and the globally popular Premier League soccer, which will be available in 4K in 2023 on the streaming service.
NASDAQ: CMCSA
Key Data Points
Is Comcast stock a buy?
As it stands, Comcast is not a buy. Its quickly falling cable subscriber numbers in the second quarter highlighted its overreliance on a slowly dying technology. However, its recent investments in streaming are positive as Peacock has the potential to grow into a worthy opponent in the streaming wars with the right content.
Regarding the decline in broadband subscribers, CEO Brian Roberts attributed the losses to an increase in fixed wireless internet services and believes the "mobile substitution will eventually stabilize." Comcast's third quarter hasn't had a stunning start, with a loss of 30,000 more broadband subscribers in July. However, recent ventures into multi-gigabit internet offerings and the CEO's expectations of market stabilization could change that situation.
Investors will want to follow Comcast's business pivot. The decisions it makes now could heavily influence its profitability for years to come. Comcast is taking its recent hits seriously, which is a good sign, but more will be clear at the beginning of 2023, when the stock could blossom if its recent moves pay off.
