Shares of Comcast fell as much as 8% in morning trading, before closing down just over 6% at $41.70, after the Philadelphia-based media giant reported a slowdown in new subscribers, as it spends more to lure them.
A gain of just over a quarter of a million new subscribers is "down sharply from last year" — and one-third of those "new" subscribers had previously been receiving the service under a temporary free program but weren't reported by Comcast until this morning's quarterly earnings disclosure, analyst Craig Moffett told clients in a report this morning..
The stock fell below $41 for the first time since June 2020, when Spring pandemic closings had sparked a plunge in the stock market.
Moffett noted that Netflix and Facebook share prices have also reacted sharply to recent user growth reports. He added that AT&T and Verizon, like Comcast, reported "weak" viewer growth.
Comcast posted record sales of $31 billion in its first quarter earnings report Thursday, up 14% from a year ago, as customers returned to theme parks, and more signed on for its Internet service, the largest in the U.S.
The company also reported $3.9 billion in adjusted net income for the three months ended March 31, up 10% from a year ago, though short of the record $4 billion it reported for last year's third quarter, which was swollen by ad sales from the Tokyo Olympics. Gains from this winter's Beijing Olympics were smaller.
Sales rose significantly for Comcast's NBCUniversal media-content businesses. Excluding sales from the Beijing Olympics and the Super Bowl, the media unit collected revenue of $5.38 billion during the quarter, up 6.9% from a year earlier. Revenues from the company's smaller Universal theme-parks business was up 152%, as the company opened its Beijing Resort in China and pandemic restrictions eased elsewhere.
Chief executive Brian L. Roberts said the report showed "healthy growth." The company's financial returns beat analysts' recent targets, though those had been reduced from earlier predictions.
Comcast said new programming investment has continued to cost more than it is bringing in from its advertising-backed Peacock streaming services, whose offerings include the company's popular Yellowstone series, a contemporary Western. The company plans to switch reruns of popular programs to Peacock from Hulu, officials told investors in a conference call this morning.
The company said it had spent more on U.S. capital improvements, and less in Europe, compared to a year earlier. "Comcast has done a good job of getting 1-Gigabyte Internet speeds to many customers," including his Florida home, said Louis Navellier, head of Navellier & Associates, which manages $1 billion.
He noted, however, that analysts have expressed concerns about media profit margins. Despite those concerns, Comcast said its profit margin from cable, before taxes and other financial costs, increased to 44%, from 43% a year earlier.
Comcast shares opened lower after the earnings report. Trading started at $42.27, down from Wednesday's close of $44.45 and far below the company's all-time high of $61.72 last Aug. 30. Shares continued falling for much of the morning.
The company resumed re-purchases of its own shares,a move designed to boost the share price and show confidence in profit prospects.. It had stopped such purchases in 2019 as it paid down debt linked to the acquisition of UK-based media company Sky. During the quarter, Comcast spent $3 billion buying back 62.5 million shares, and another $1.2 billion on quarterly dividends.
Shares of media giants including Netflix and Facebook fell last winter over concerns of possibly slowing growth of new users, though Facebook rallied after boss Mark Zuckerberg told investors he was slowing his costly investment in the Metaverse program.
Over the past year, Comcast shares have trailed rivals AT&T, Verizon and Disney but lost less than cable giant Charter Communications, which on Wednesday joined Comcast in announcing a joint streaming program to better compete with popular services offered by Amazon and Roku.
"There have been "a lot of dislocations in the market. A lot of media stocks have been under pressure, especially in the last couple of weeks," John Hodulik, an analyst for UBS, said in the conference call. He asked if Comcast may see the period as an opportunity for acquisitions.
Comcast reported 34.4 million customers use its Xfinity consumer Internet, video, and wireless of March 31, up 2.7% from a year earlier. They paid an average of $160.67 a month, up 1.6% from a year earlier. The company signed 262,000 new broadband customers, but lost 512,000 video customers, during the quarter as Comcast reduced cut-rate promotions.
Revenues from residential broadband Internet, Comcast's largest business, rose during the quarter , as did business services. Roberts said that Comcast had ended free services to customers it had given special access earlier in the pandemic. The company said about a quarter of those previously receiving free access were now paying customers.
Video sales through its traditional U.S. cable business declined, and sales and customer counts were down at Comcast's largely UK- , German-language and Italy-based Sky businesses, as Italian pro soccer moved to other operators. Sky's profitability improved.
