Comcast Q4 Review: COVID Makes CEO Confidence a Tough Sell

Comcast Q4 Review: COVID Makes CEO
Cheyne Gateley/VIP

What pandemic?  

Judging by the rosy guidance Comcast outlined in its fourth-quarter financial results Thursday morning, COVID-19 is somehow not heavily weighing on its business despite the fact that the company’s biggest revenue generator, the Olympics, is in doubt in 2021. 

It’s a hard line to swallow at this point, but investors seem to be buying that Comcast’s fundamentals remain intact, and the stock shot up Thursday as investors let out a collective sigh of relief. 

CEO Brian Roberts seems to have sold Wall Street on three crucial points underscoring his confidence in the company’s future: First, he believes vaccine hopes will bring meaningful recovery for struggling NBCUniversal. Second, Comcast is boosting its dividend and third, stock buybacks could possibly make a comeback in the back half of the year. 

2021 has all the potential to be a strong year for Comcast, but it all hinges on a swift end to the global pandemic. But if COVID’s impact is prolonged, all of Comcast’s hopes for this year could be quickly thrown out the window.  

Remember what the pandemic did to Comcast, and more specifically, NBCUniversal? The theme-park business saw revenue tank 63% in Q4, while filmed entertainment sales fell 8% and broadcast television revenue declined 12%. NBCUniversal’s total revenue in 2020 dropped more than 17% compared to 2019 amid the challenging macroenvironment.  

In order for a true recovery to take place in 2021, theme parks need to fully open back up soon with increased capacity, movie and TV production needs to ramp up and sporting events like the highly lucrative Olympics need to actually happen.  

Roberts expressed confidence that the Tokyo Olympics would in fact take place as planned in 2021, but if the pandemic taught us anything, it’s that you can’t plan with certainty yet. While we all hope that life can go back to normal soon and events like the Olympics can take place, it’s just not guaranteed. The issue is, NBCUniversal doesn’t really have that luxury if Comcast plans to deliver on all of its promises for a brighter future ahead.  

The Olympics are a vital top-line driver for Comcast, and it not only brings in billions of advertising dollars across its linear channels, but the event was also touted as a major growth driver for its streaming service Peacock.  

Comcast is continuing to lean in on Peacock which launched to the general public about six months ago. Peacock had 33 million sign-ups in the U.S. to date, up from 22 million in Q3.  

Management announced that Peacock brought in $100 million in revenue but also had EBITDA losses of $700 million last year. It expects another $1.3 billion in losses in 2021. It is undoubtedly going to be costly for Comcast, but that’s something that investors have braced themselves for in the streaming wars. 

Peacock is relatively new so it’s understandable that subscriber growth wasn’t quite on the same level as rivals Netflix and Disney. However, there continued to be a lack of transparency with its subscriber numbers.  

By reporting “sign ups” it’s unclear how many people are paying for the service, how many are accessing free plans and how many are bundled with cable. Thus, it fails to illustrate to investors the true pace at which growth is occurring. Peacock remains a critical part of Comcast’s future because the service is eventually meant to recoup the advertising dollars lost through traditional cable. But without scale, it will be challenging to recover the pay-TV losses.  

Cord-cutting continued to take its toll on Comcast. It shed 248,000 pay-TV subs in Q4 but the pain was largely offset by the growth of its higher-margin broadband business. The company added 538,000 broadband subscribers during the quarter.  

Broadband had a banner year in 2020. However, there is concern is that the growth is unsustainable and will decelerate significantly in 2021. If that is in fact the case, NBCUniversal is going to have to make a sizable comeback to pick up the slack. Wall Street and investors will be paying close attention to make sure management wasn’t overly optimistic with its outlook, and Comcast can in fact fire on all cylinders this year.