Comcast is riding the information wave

Comcast (NASDAQ:CMCSA) offers a unique opportunity in the communications services sector. It differs from Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX) in an important way: substantial and consistent free cash flow generation. The primary operational difference between the three companies is that Comcast owns physical network infrastructure.

Broadband demand should remain firm with natural growth alongside data usage. Looking within the communications services sector, Meta’s (NASDAQ:META) plans for augmented and virtual reality offer a glimpse into future data growth potential. As a result, a key issue for the Comcast investment case is the value of its network.

Risk/Reward Rating: Positive

With Comcast trading at a fraction of the valuation of Disney and Netflix, as covered in “Netflix is dancing in the rain,” it is fair to say that the market has deeply discounted the value of Comcast’s network. The following image displays the geographic footprint of Comcast’s broadband network. It is from the company’s 2021 annual report filed with the SEC.

Source: Comcast 2021 Annual Report on Form 10-K

At risk of stating the obvious, it is worth noting that the United States remains the largest economy in the world. A cursory glance at the above map confirms that Comcast would be hard pressed to have a higher value footprint in the United States. The network covers many of the wealthiest geographic regions in the country and spans over 60 million households.

While competition from other network providers is always present, Comcast’s results suggest that its network services are valued in the marketplace. Reliability and service quality are likely to be key differentiators going forward. This is especially true with work from home being the new normal.

Consumers in the above markets will pay premium prices for network reliability and service. The regions are also at the higher end of the market in terms purchasing power. Enhanced purchasing power opens the door to a multitude of communication and entertainment services, such as multiple streaming subscriptions.