Comcast’s stock fell over 10% on Thursday morning following the company’s announcement of a larger-than-expected drop in broadband customers for the fourth quarter and stagnation in subscriber growth for its Peacock streaming service.
Comcast faces stock plunge amid broadband subscriber losses
The company disclosed a decline of 131,000 broadband users, surpassing the estimated loss of 100,000 predicted by Comcast Cable CEO Dave Watson in December. The drop reflects increased competition from mobile providers like Verizon, T-Mobile, and AT&T, which have attracted lower-income consumers with more flexible plans.
Despite these challenges, Comcast stated its commitment to the connectivity business and announced strategic changes to leverage its strengths in an environment where internet usage is growing due to the streaming boom. Michael Cavanagh, Comcast’s president, emphasized that “Wireless is a meaningful differentiator as our converged offers provide great savings to the consumer,” and indicated that the company will shift its strategy to bundle mobile services with higher-tier broadband products for both new and existing customers.
Comcast’s difficulties in broadband were compounded by a loss of 311,000 TV subscribers as customers continue to abandon traditional cable in favor of more affordable streaming options. The company recently launched a new sports and news TV package, which includes Peacock, priced at $70 a month, lower than competitors like YouTube TV.
Peacock subscriber growth remains flat
During the earnings call, Comcast highlighted the importance of Peacock, although the platform did not gain or lose any subscribers during the quarter, with total paying users remaining at 36 million. The company did report an improvement in profitability, posting an adjusted EBITDA loss of $372 million, down from a loss of $825 million during the same period last year. Management anticipates further improvements in losses throughout the year.
Craig Moffett, an analyst at MoffettNathanson, noted a negligible subscriber drop following the conclusion of the Summer Olympics as a positive outcome. However, other analysts on Wall Street remain cautious regarding Peacock’s competitive position. Ross Benes, a senior analyst at eMarketer, expressed concerns regarding the costs associated with competing in the streaming market, stating that “Peacock is finding out that it’s expensive to compete in the streaming wars and gains are becoming more difficult to come by,” and observed that the ongoing trend of cord-cutting makes the divestiture of TV networks a sensible decision, though the market for buyers may be limited.
Comcast previously announced a plan to spin off most of its cable properties, excluding Bravo, with the new entity referred to as SpinCo. This spun-off company will encompass most of NBCUniversal’s cable television networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY, and the Golf Channel. During the earnings call, Comcast maintained an optimistic view on the spin-off, with Cavanagh stating that “As a well-capitalized independent company with a focused management team and strong portfolio of news, sports and genre-based entertainment, SpinCo will be well positioned to lead in the changing cable and digital media landscape.”
Comcast also revealed a drop in total domestic broadband customers, which fell by 139,000 to 31.8 million, including 131,000 residential and 8,000 business subscribers. The company’s adjusted earnings per share (EPS) reached $0.96, with overall revenue increasing by 2% year-over-year to $31.92 billion, both notably exceeding Visible Alpha forecasts. Revenue from Connectivity & Platforms rose 5% to $11.5 billion, while Peacock’s revenue grew by 28% to $1.3 billion.
Comcast’s shares declined by more than 11% Thursday morning, resulting in a nearly 30% decrease in value over the past year.
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Featured image credit: Comcast
