The entertainment industry has had a few tough years as the pandemic closed theme parks, theaters, and more. Then, a jump in inflation forced consumers to cut discretionary spending just as they were beginning to make it back to entertainment venues.
Now, easing inflation could allow the industry to recover over the next year. Inflation has decreased for nine consecutive months, hitting 4.9% in April after reaching a high of 9.1% in June 2022. As a result, now is a compelling time to consider investing in an entertainment stock that is down over the last year, but could soar as economic headwinds subside.
Comcast (CMCSA -0.52%) shares plunged over 30% in 2022 and remain down year over year despite a small rally in 2023. However, the company has a promising outlook as its movies and theme parks gradually build it into a formidable competitor to Walt Disney. A bull market is coming, and here are two reasons to buy Comcast stock.
1. It's becoming a true rival to Disney
Comcast has been one of the biggest victims of the declining cable industry as consumers leave behind linear offerings for wireless/streaming alternatives. But unavoidable hurdles create a great opportunity to watch a company closely as its next moves may determine whether or not it's worth investing in. In Comcast's case, the company has made content creation a larger focus, which could see it rival Disney in a way others haven't been able to before.
As the home of NBCUniversal, Comcast owns popular franchises such as Jurassic Park, Back to the Future, Fast & Furious, and the animation studio Illumination, which produced April's hit film The Super Mario Bros. Movie, which took in $1 billion in its first 26 days. The new title could be the start of a totally new film series with a massive advantage at the theater, using beloved Nintendo characters.
In addition to box office success, Comcast's streaming service, Peacock, is expanding quickly. In the first quarter of 2023, the platform's subscribers grew more than 60% year over year to 22 million, with revenue climbing 45% to $685 million.
Moreover, Comcast has an edge over Disney's other rivals, such as Netflix and Warner Bros Discovery, since it operates a string of popular Universal Studios theme parks worldwide. The company has attracted millions of visitors since adding a Harry Potter-themed area and, more recently, opening a Super Nintendo World at its Japan and California locations.
The success of The Super Mario Bros. Movie could offer the parks a boost this quarter after Comcast's theme parks segment already enjoyed revenue growth of 25% in the first quarter of 2023.
2. It's a bargain
Comcast's stumble in recent years has brought down its stock price but has also made it an increasingly compelling investment. The stock's price/earnings-to-growth ratio (PEG) of 0.7 says it all, with the metric suggesting that projected growth is not currently priced into its shares. PEG is a metric that determines a stock's value while also considering its expected earnings growth. A PEG lower than 1.0 is preferable because it indicates the company is undervalued, making Comcast an attractive option.
Data by YCharts.
The chart above compares the price-to-earnings ratios (P/E) of some of the biggest names in entertainment, with Comcast currently the best-value stock with a P/E of only about 11. The figure on its own makes the shares appealing, but stacked against the competition, it becomes a bargain buy.
A reasonable valuation, the release of Fast & Furious X on May 19, several blockbusters next year, and the planned opening of Super Nintendo World at Universal Studios Florida in 2025 all add up to a strong outlook. As a result, now is an excellent time to consider Comcast stock.
