Comcast trades at seven times expected earnings. The market doesn't believe in its most profitable business
Comcast $CMCSA trades at a forward P/E around seven times and fell this summer to its lowest level since 2013, even though it remains highly profitable. The market has stopped believing in its most profitable part, domestic internet, which lost another 167,000 customers in the second quarter. The decline was deepened by the results: the stock reversed in a single day from a nearly three percent gain to a roughly seven percent loss, even though adjusted earnings per share of $1.04 beat consensus and the streaming service Peacock reported its first profitable quarter since its launch in 2020.
Key points
A cheap stock the market doesn't believe in. Comcast trades at seven times expected earnings and near a thirteen-year low, even though it remains highly profitable. The entire cable sector has been repriced downward due to competition from fiber, fixed 5G, and newly Starlink satellite.
The core problem is broadband. The company lost another 167,000 customers of its most profitable domestic internet and is deliberately lowering prices. A record 448,000 new mobile lines does not fully replace this, because roughly half are free and mobile has a lower margin than its own cable network.
The split could unlock value. The sum of the two new companies valued separately comes to roughly 120 to 170 billion dollars, above today's market capitalization around 90 billion. The key is what multiple connectivity and entertainment will earn after independence, official pro forma statements are not yet available.
Frozen dividend and suspended buybacks. Comcast this year did not raise its dividend for the first time in seventeen years and stopped buybacks to protect cash before the split. A yield over 5% reflects the fallen price, not generosity.
Peacock, Odyssey, and the YouTube deal as catalysts. The streaming service earned a profit for the first time, Nolan's film surpassed 1.3 billion dollars and will be reflected only in the third quarter, and from 2027 Peacock will enter YouTube Premium. The sustainability of Peacock's profit outside major sports is yet to be tested.
Signals from the balance sheet correspond to this. Comcast increased its dividend for seventeen consecutive years, but this January it left it unchanged for the first time and in July also suspended share buybacks to protect cash before the planned split. The stock rose from its summer low to mid-August by roughly a fifth, to $25 to $26. But the question remains: is Comcast really cheap at its current price, or does the market have reason to value it so low?
Why a beaten earnings estimate didn't help the stock
Consolidated revenue for the quarter ending June 30 reached 29.94 billion dollars, down 1.2% year-over-year, roughly in line with analyst expectations. Adjusted EBITDA fell 13.4% to 8.90 billion and net income attributable to shareholders was 3.53 billion versus 11.12 billion in the same period last year.
These comparisons are distorted by three influences. Last year's second quarter included a gross profit of 9.4 billion dollars from the sale of its Hulu stake, which explains virtually the entire drop in net income. On the revenue side this year, Versant is missing, the bundle of cable channels spun off on January 2, 2026, and the German Sky operations sold on May 31, 2026. After adjusting for both, i.e., on a pro forma basis, revenue rose 4.7% and adjusted EBITDA fell 5.3%. That is a different picture than the reported minus 13.4%.