Goldman Sachs cuts Comcast stock target to $44, maintains buy

On Thursday, Goldman Sachs analyst Michael Ng revised the price target on Comcast Corporation (NASDAQ:CMCSA) shares, reducing it from $50.00 to $44.00, while still recommending the stock as a Buy. With a market capitalization of $126 billion and trading near its 52-week low, InvestingPro analysis suggests the stock is currently undervalued. The adjustment follows Comcast’s fourth-quarter 2024 results, which revealed a shortfall in domestic broadband growth, prompting a conservative revision of the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) projections for the years 2025 through 2027.

Comcast’s recent quarter saw domestic broadband numbers fall short of already reduced expectations, largely due to a weaker December. The company, which generated $123 billion in revenue over the last twelve months with an impressive 69.7% gross profit margin, is intensifying its use of wireless offerings to attract and retain subscribers, despite the negative impact on near-term margins due to higher direct product costs, such as mobile virtual network operator (MVNO) network expenses and device subsidies, as well as increased marketing efforts and average revenue per user (ARPU) challenges.

Specifically, Goldman Sachs now forecasts a decrease in domestic broadband net additions to -496,000 for 2025 and anticipates ARPU growth to be around 3.0%, which is at the lower end of Comcast’s projected 3-4% range. This projection includes a warning that growth may occasionally dip below 3%. Additionally, the firm has increased its expectations for year-over-year growth in customer premises equipment (C&P) direct product costs to 10%, due to rising wireless costs.

In terms of profitability, Goldman Sachs predicts a more modest expansion of C&P EBITDA margins, estimating 40.5% margins in 2025 and 40.7% in 2026, with an increment of 10 basis points year-over-year and 20 basis points year-over-year, respectively. The firm also expects no C&P EBITDA growth over the next two years due to the broadband pressures mentioned, as well as headwinds from foreign exchange rates and political advertising comparisons.

Despite these challenges, the report notes positive trends, such as improved domestic parks attendance in the fourth quarter of 2024 and a forecast for narrowing losses for the Peacock streaming service in 2025. Currently trading at an attractive P/E ratio of 8.8x and offering a 3.3% dividend yield, Comcast maintains strong shareholder returns. With the stock trading at 5 times its projected 2025 enterprise value to EBITDA (EV/EBITDA) and a credible strategy for convergence, Goldman Sachs views the shares as attractive and reaffirms its Buy rating, albeit with a lowered 12-month price target. For deeper insights into Comcast’s valuation and financial health, access the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Comcast Corporation reported significant broadband subscriber losses in its fourth-quarter results, which also impacted Charter Communications (NASDAQ:CHTR) ahead of its earnings report. Comcast’s revenue, however, increased by 2.1% to $31.92 billion, exceeding expectations. Analyst Geetha Ranganathan from Bloomberg Intelligence suggested that this decline in subscribers, largely due to competition from fixed wireless access and fiber, could pressure cable companies like Charter in the future.

In parallel, Comcast announced an increase in its annual dividend and the authorization of a $15 billion share repurchase program, demonstrating its commitment to shareholder returns. This move was accompanied by the launch of a new video bundle, Sports & News TV, for Xfinity Internet customers.

Meanwhile, Benchmark analyst maintained a Buy rating for Comcast, with a steady price target of $57.00, despite acknowledging challenges posed by consumer and advertising trends. Comcast also experienced a leadership change at MSNBC, with Rebecca Kutler stepping into the interim role following President Rashida Jones’ departure. These are some of the recent developments at Comcast Corporation.

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