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The Ratings Game: Comcast stock slide continues as subscriber pressures send some analysts packing

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Shares of Comcast Corp. were extending their decline Friday, falling 5% in morning trading after dropping 9% in Thursday’s session.

Comcast
CMCSA,
-6.89%

on Thursday posted better-than-expected earnings and revenue but failed to add broadband subscribers on a net basis. Several analysts downgraded the stock in the wake of that report.

“Comcast shares are cheap, but we struggle to figure out why that changes in the next six months,” wrote JPMorgan’s Philip Cusick, as he lowered his rating to neutral from overweight and cut his price target to $45 from $52.

Company executives pointed to a number of factors Thursday that they saw driving the broadband subscriber performance, which came in weaker than what analysts were anticipating. Chief Executive Brian Roberts flagged that the biggest factor, in his view, was that fewer people have been moving homes relative to earlier in the pandemic, though he also acknowledged that the company faces some competition from fixed-wireless-access [FWA] providers.

“With negative subscribers in July, we expect some seasonal rebound in August/September, but also continued weak housing for the next year and an overall acceleration in FWA adds as well as slow but continued pressure from fiber overbuilds,” JPMorgan’s Cusick wrote.

Wolfe Research analyst Peter Supino struck a more bearish tone, as he lowered his rating to underperform from peer perform.

“Although Comcast’s broadband churn remains below 2019 levels, cable share of gross adds continues to deteriorate,” he wrote. “With our industry model in mind, our base case now reflects a negative net add trajectory.”

Supino added that “the likely outcome over the next several quarters is lower fixed/mobile bundle pricing that results in an improved market share trajectory,” in his view. Still, he said that such a strategy might come with a cost since it could require “more aggressive mobile discounting.”

Analysts on the whole remain largely bullish on Comcast, with 23 of the 37 analysts tracked by FactSet who cover the name sporting buy-equivalent ratings.

Comcast shares are down 5.8% over the past three months as the S&P 500
SPX,
+0.87%

has fallen 0.4%.

Peer Charter Communications Inc.
CHTR,
+0.27%

posted its earnings results Friday morning, and its shares were faring better than Comcast’s even though Charter saw a drop in internet subscribers. Charter shares were ahead 1.7% in morning trading.

Charter’s stock is ahead 3.3% over a three-month span.

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