KeyBanc Capital Markets lowered its investment rating on Comcast (CMCSA) to “sector weight” from “overweight,” citing a lack of catalysts following the company’s third-quarter results.
The research firm said while broadband and mobile net additions were better than expected in Q3, it underappreciated the investment needed to achieve those results. It also noted that shareholder returns in terms of buyback are likely to decline going forward due to the investments for connectivity and platforms division, ramping NBA costs, and Versant spinoff.
KeyBanc pointed out that Comcast’s broadband penetration rate has fallen for 14 consecutive quarters, and hence they need to see signs of stabilization before becoming more constructive on the company.
“Competitive concerns in broadband are likely to continue for the foreseeable future as telecom providers ramp fiber and FWA offerings over the next several years, where it’s uncertain if and when Comcast will return to broadband subscriber growth,” the research firm said in its analysis dated October 30.
“While CMCSA is inexpensive … we think it’s clearly trading there for a reason, as competitive concerns are elevated and investment is needed to hopefully return CMCSA to competitive positioning,” KeyBanc said.
The research firm currently does not have a price target for CMCSA.