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Here's Why You Should Hold Comcast (CMCSA) in Your Portfolio

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On Aug 29, we issued an updated research report on leading cable MSO (multi service operator) and media and entertainment firm Comcast Corp. (CMCSA - Free Report) . The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Shares of Comcast have gained 7.3% compared with the industry’s gain of 6.7% over the past six months.

Positives

Comcast completed the nationwide rollout of its wireless services under the Xfinity Mobile brand. Based on a Mobile Virtual Network Operator (MVNO) agreement with Verizon Communications Inc. (VZ - Free Report) , Xfinity Mobile will be using Verizon's 4G LTE wireless network. Xfinity Mobile is expected to be the nation’s first wireless service combining the largest and most reliable 4G LTE network with 18 million Xfinity Wi-Fi hotspots. With this, the company is aiming to deliver a great wireless experience, which is cost effective.

Comcast is venturing into residential solar programs with a 40-month deal with Sunrun Inc. (RUN - Free Report) . Per the deal, Sunrun will be the exclusive residential solar energy provider for Comcast Cable (one of the primary businesses of Comcast). Comcast Cable will serve as one of Sunrun’s strategic partners through marketing campaigns in selected markets. This is one of Comcast’s plans to expand into new lines of business as growth in selling cable-TV subscriptions has slowed down due to cord cutting.

Comcast is currently working toward the deployment of 5G network and continues to roll out its DOCSIS 3.1-based internet services to Comcast Business customers in n the Northeastern and Mid-Atlantic United States. Comcast has forayed into the over-the-top video delivery market with the launch of its Internet TV service, Stream. Comcast is also focused on expanding its theme park business. With this, Comcast aims to check customer churn and provide viewers with more streaming options.

Downturns

Over the last 3-4 years, the internal dynamics of the U.S. pay-TV industry have been gradually shifting from cable TV operators to large telecom operators and low-cost over-the-top service providers. Extensive network of fiber-based video services from telecom operators is a threat. The strong presence of online video streaming providers such as Netflix Inc. (NFLX - Free Report) , Hulu.com, YouTube etc., have become a severe threat to cable TV operators because of their cheap source of TV programming. As a result of cord-cutting, Comcast lost 34,000 video customers and 22,000 voice customers in the last reported second-quarter of 2017.

The domestic multi-channel video market has also become extremely saturated and intensely competitive. Moreover, the U.S. pay-TV industry remains affected by the ongoing massive consolidation between telecom and cable TV operators to strengthen their base.

Another major concern for Comcast is its spiraling programming expenses. Operating income came in at $4,558 million, up 12.1% year over year. Operating margin rose to 21.5% compared with 21.1% in the year-ago quarter.

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