Comcast Still Looking for Compelling Story After Merger’s Termination

NEW YORK (TheStreet) -- Comcast (CMCSA) remains a huge, well-positioned company, but investors may want to see more than just business as usual if the stock is to regain momentum after last month's termination of its planned merger with Time Warner Cable (TWC).

Possible catalysts include a new video offering along the lines of Dish Network's  (DISH) SlingTV or Time Warner's  (TWX) HBO NOW, or even another acquisition, albeit one with a much smaller price tag than Time Warner Cable's $45 billion one. Investors listening on Monday to Comcast's earnings conference call didn't hear about anything of the sort, although the company's revenue and profit beat expectations, sending shares rising.

CEO Brian Roberts did emphasize that Comcast's continuing rollout of its cloud-based X1 TV platform remains a high priority. By 1:50 p.m. EDT on Monday, Comcast's stock was priced at $58.83, a rise of .73% thus far for the day. But it remains to be seen if the company can sustain investor interest without a new major storyline.

"A good stock needs more than just an attractive valuation," media analyst Craig Moffett of MoffettNathanson Research said in an investor note on Monday.

Among Comcast's rivals, Time Warner Cable is the "belle of the M&A ball," Moffett said, due to a standing merger offer from Charter Communications (CHTR), while Cablevision (CVC) is a potential takeover target of its larger rivals. And Time Warner Cable and Cablevision have a story that can be communicated in only a few words, Moffett said. Yet that's not the case for Comcast.

Comcast's first-quarter results were strong across the board and made a compelling case that it is the best cable operator with the best assets in that industry, Moffett said. But Comcast's narrative ultimately can't be that it's the largest U.S. broadband company. AT&T (T) and DirecTV (DTV) will be the largest if their proposed merger is finalized.

Another strong story to tell investors is that Comcast can launch a national Wi-Fi-first wireless network, Moffett added, though the company will need partners to make that work. For now Comcast is the largest broadband player and can boast that it offers a unique mix of content and distribution, he said. Comcast owns NBCUniversal.

But Comcast already had those advantages two years ago before its planned merger with Time Warner Cable. It now seems boxed in by regulation and may end up just a bystander during ongoing industry consolidation, Moffett said. Roberts, though, sought to shift the focus to the X1 platform.

"Getting X1 rolled out, I think, is still the best opportunity in the company in the very short run and that's what we're pretty focused on," Roberts said.

At the end of the first quarter, about 2.5 million Comcast customers had the X1 cloud-based platform that grants users the ability to view TV shows and other content across multiple devices and watch DVR recordings from any room. Plus it includes customized apps.

Comcast's first-quarter revenue grew 2.6% to $17.9 billion, while earnings per share climbed to 81 cents from 71 cents. The number of high-speed Internet customers swelled by 407,000 people to 22.4 billion. But video customers dipped to 22.4 billion from 22.6 billion.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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