mike:
as i said in my last post, i still havent sold any comcast after the recent run-up and I dont really intend to in the near future unless the prices runs into the $25 range in the next couple of months.
in terms of putting fresh money into the company, it is not the lay-up I think it was a couple of months ago (see my first post), but I still think there are many arguments which would support an investment in the company especially when an investor looks at alternative investment opportunities. In other words, compared to the majority of stocks in todays market, I still think Comcast is an excellent buy.
First, the fundamentally, the Company is doing very well. the historical trends and projected growth of QVC, Cable, and Cellular are 10%+ and should show additional acceleration with the international expansion of QVC in germany and Asia, the new services for cable i.e. cable modems etc and price increases slated for later this year, and strong continued cellular customer growth although the margin should fall in that business because of intensifying competition from PCS and other providers. In addition, Comcast has several billion of non-cash flow producing assets on its balance sheet like Teleport ($1 billion + of public stock)
Second, I think your downside protection - even despite the recent run-up - is very limited versus most other stocks. The business franchise of cable is strong and despite some inroads from DBS, the threat of competition is limited in the future. Even despite the run-up, Comcast is still trading at less than 8x 1997E cash flow which is at the low end of the historical range of 8x - 11x. Even at $21 - and this was my theory when I bought at $16 - I dont think the stock will dip too much below $19-20 a share - you cant say that about too many stocks in todays market.
The attractiveness of the risk reward ratio on the upside is potentially significant. Valuing the company at 9x cash flow adds another $5 to $6 to the stock prices or 25% to 30%. This potential multiple expansion will likely occurr as the new generation of services come on line in the next several years. One of my criteria for stock selection is to find companies which will have earnings/cash flow growth and have potential for multiple expansion. A company like Coke clearly has not much more potential for multiple expansion and this the stock price can only be driven my earnings growth. Comcast on the other hand has significant potential for both earnings/cf growth and multiple expansion and Microsoft's announcement I think was the first step in making investors realize the fair value of the Company's assets.
Hope this is helpful in your decsision
nick |
