Despite the almost daily articles about cord cutting and cord shaving and OTT services and the end of cable TV as we have known it, Comcast continues to grow at a steady rate.  In 3Q16, cable revenue grew 7% and cable operating cash flow grew 6%.  Comcast added over 200,000 new subscribers and good old cable TV added 32,000.  Comcast has now added 170,000 video subscribers in the past 12 months.  That is right.  Despite all the doom and gloom, Comcast is growing cable subscribers.  Add that to the company’s best in class broadband product and a growing business serving small and mid-size businesses (now over 11% of cable segment revenue) and Comcast’s largest business unit is doing just fine.

Over at NBC Universal, each business unit – theme parks, cable TV networks, broadcast/NBC, and the film studio is growing nicely.  With AT&T attempting to buy Time Warner, it is worth noting that Comcast’s 2011 acquisition of NBC Universal from General Electric has been a great success from a financial standpoint.

Comcast’s legacy as the bad, customer unfriendly cable company is being put in the past.  The reality is that company has become an innovator and industry leader.  The X1 video platform offers an outstanding interface.  Comcast offers more on demand programming than any traditional or new competitor.  TV Everywhere capabilities now offer over 100 channels of live TV accessible on any device.  This fall, Netflix will be integrated directly into X1.  This is likely the first step of turning X1 into a single source aggregator of all the video needs in a household.  Turn on your TV and go to X1 and all your video options are right there and searchable with a recommendation engine.

A big risk to the cable industry has been losing control of the customer relationship and being disrupted by Apple or Google or Netflix.  Comcast has made a smart strategic move to become the leading aggregator of video content.  This should preserve the revenue and cash flow stream of the video business and allow the growth engines of broadband, business services, and NBC Universal to sustain mid to upper single digit growth in revenues and cash flow.

Comcast has accomplished its strategic transformation with a very strong balance sheet and returns cash to shareholders in dividends and stock buybacks.  In general, media companies carry above average debt.  Comcast’s balance sheet strength is most important as the new threat to its business model comes from the convergence of wireless companies like AT&T and Verizon with the cable industry.  The threat of wireless broadband displacing cable’s wired broadband is already impacting sentiment toward Comcast shares but we see the threat as being well into the future.  In the meantime, steady growth, financial strength, innovative strategies, and strong management execution leave Comcast shares as an attractive and lower risk long-term investment.  Using operating cash flow multiples of comparative companies suggest the stock can reach the mid $70s over the next year.

CMCSA is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  CMCSA is a net long position in the Entermedia Funds.