RBC starts Comcast with a neutral view amid broadband competition

Investing.com -- RBC Capital Markets started coverage of Comcast Corp with a Sector Perform rating and $38 price target, saying company’s solid execution has not been able to offset intense competitive pressures in broadband. The brokerage also said there was a lack of near-term growth drivers.

Comcast faces challenges from fiber and fixed wireless providers that continue to take market share, putting pressure on subscriber numbers and pricing.

“Our residential broadband subscriber estimates imply annual declines through 2030 and an internet penetration decline of 7 points through 2030,” the analysts wrote.

RBC’s $38 price target assumes largely flat profit margins over the next several years. Shares are down 3.9% at $32 in Monday premarket trading.

Comcast has recently adjusted pricing to better defend its position, but said the expansion of rivals’ networks will remain a “significant challenge” as promotional deals expire and consumers weigh alternatives.

A survey found only 32% of Comcast broadband users considered cable the preferred technology, compared with 33% for fiber and 18% for fixed wireless.

While RBC called Comcast’s network strategy efficient, it flagged longer-term risks tied to the company’s reliance on the DOCSIS upgrade path and the potential need for more costly fiber deployments if competition intensifies.

There is also the issue with financial discipline, given a leverage ratio below 2.5 times. But analysts said management has opted for a cautious stance on share buybacks given revenue and profit headwinds.

“Risk-reward profile appears favorable, but we see few near-term catalysts,” RBC said, adding that limited visibility on subscriber trends is likely to prevent a re-rating of the stock in the near future.

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