Continue Avoiding Comcast After Free Cash Flow Falls 31.6%
Back in October I showed you 2 Reasons To Avoid Comcast stock to protect your retirement portfolio…
Today, I give an update after it released its latest earnings and tell you why to – Continue Avoiding Comcast After Free Cash Flow Falls 31.6%.
You can read the past article in full using the link above.
But if you don’t want to; here’s a quick recap before we get to today’s update.
2 Reasons To Avoid Investing In Comcast
- It’s Got A Lot of Debt
Comcast Corp (CMCSA) is one of the United States largest cable and internet providers with access to 59 million homes.
And it’s got a lot of debt.
As of the most recent quarter its balance sheet is 68.4% in total liabilities. And its debt-to-equity ratio is 1.21.
I want to invest in safe stocks that will be around for decades to build wealth over the long term. This helps insure I lose as little money as possible over time.
Typically, this means I invest in companies that have little to no debt compared to their cash and equity. For example, I like to invest in stocks that have debt to equity ratios below 1.
Its debt-to-equity ratio at 1.21 doesn’t seem too high… But it also doesn’t show the full story.
It has only $13.9 billion in cash compared to $84.8 billion in total debt and capital leases.
Its debt is so large that it makes up 40.7% of its $208.4 billion market cap.
And this debt load makes investing in Charter stock riskier right now… Especially with all the craziness going on today.
Plus, there’s something else that makes it risky too…
2. Cord Cutting
In 2013 there was an estimated 100.5 million United States households that paid a monthly subscription for cable.
That’s dropped by 17.5% today to only 82.9 million people.
And this number is projected to continue falling all the way to 72.7 million by 2023. This process of people getting rid of their cable subscriptions is called cord cutting.
Why is this happening?
Because it’s no longer necessary to have cable for entertainment. You can now stream almost anything you want to your TV’s, phones, and other devices anywhere on the go.
As a few examples…
- Netflix now has 182.8 million subscribers worldwide as of April 2020.
- Amazon Prime Video has 150 million subscribers as of February 2020.
- And Disney+ has 60.5 million subscribers as of August 2020 only 9 months after launching in November 2019.
Cable companies like Comcast partially offset this by getting more people to buy internet services through them.
But that’s becoming less necessary with data plans from cell phone operators.
Cable looks on an inevitable decline to extinction over the next decade plus which makes investing in Comcast stock even more risky.
For the reasons of its large debt and cord cutting I recommend you avoid investing in Comcast stock.
Plus, I’ve already shown you many stocks that are safer, cheaper, and have a better chance of giving you high investment returns going forward.
This thesis to avoid Comcast due to its debt and cord cutting continued to play out after it released its most up to date quarterly earnings on January 28th, 2021.
- 4th quarter revenue fell 2.4% in the year-to-year quarterly period to $27.71 billion.
- 4th quarter free cash flow fell 31.6% in the year-to-year quarterly period to $1.7 billion.
- Full year 2020 revenue fell 4.9% to 103.56 billion.
- And full year 2020 free cash flow fell 0.9% to $13.28 billion.
None of this is good… But what happened?
Lower revenue from its TV and film units… Combined with increased costs.
This due to the slow down or stoppage of much of the TV and film production due to the pandemic.
Which is bad enough… making things worse is that Comcast added $3 billion more in debt in 2020 to its balance sheet bringing its total to more than $100 billion.
Another issue… With the continuation of cord cutting, Comcast lost about 1.5 million paying “Video” customers in 2020.
Because Comcast is still dealing with the same issues I warned about last year, I recommend you continue to avoid its stock.
Especially the massive debt load and the enormous risk this brings.
Until then, use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.
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- Why Intel Is Still A Buy After Its Latest Earnings…
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.