Comcast reported another good quarter and the shares are moving up to another all-time high.  CMCSA shares are befitting from two factors.  First, the company continues to execute almost perfectly on all financial and operational metrics.  Second, the threat of onerous cable regulation has fallen sharply under the Trump Administration.  Putting the long history of excellent quarterly results together with the reduced regulatory threat and a very strong balance sheet and Comcast has emerged as a blue chip stock.  We see further upside as the valuation of the shares expands to reflect its blue chip status and financial results stay consistent at mid to upper single digit growth in revenue and operating cash flow.

In 1Q17, Comcast grew revenue by 8.9%, adjusted EBITDA by 10.4%, and earnings per share by 26.2%.  The cable business saw 5.8% revenue growth and 6.3% adjusted EBITDA growth.  Margins expanded as all operating expenses except programming expense (fees paid to TV stations and networks for the right to transmit their programming) grew at a rate below revenues.  Programming expenses are up double digits again this year but should normalize in 2018 and grow around the rate of revenue.  This sets up nice margin expansion potential in 2018 and beyond.

Supporting the long-term outlook at Comcast is the fact that cable subscribers are actually growing.  Yes, you read that correctly.  Despite all the talk about cord cutting, Comcast actually has about 1% more video subscribers now than a year ago.  This is a testament to the excellent management and smart and effective investment in its X1 platform.  Cord cutting is real.  Total cable and satellite subscribers in the U.S. are down about -2% from a year ago.  Risk remains but Comcast deserves credit for its management decisions and execution.  With video stable, Comcast continues to benefit from growth in broadband subscribers and business customers.

Not to be overlooked is excellent performance at NBC Universal.  The entire division grew revenue 14.7% and Adjusted EBITDA by 24.4% in 1Q17.  All four segments – Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks – grew revenues and all but Theme Parks saw improved profit margins.  Theme Parks had an unfavorable comparison on spring break timing.  Comcast bought NBC Universal in 2011 and the acquisition has turned out even better than ever could have been expected.  Once again, management decision-making and execution has been consistently on target. Furthermore, restrictions placed on Comcast to complete the acquisition of NBC Universal expire in 2018, creating options for leveraging NBC Universal’s content such as launching a standalone internet TV package.

Comcast shares closed at $30.76 the night before the election.  Trading today at $40, the stock is up 30% since then.  We see upside to $45-50 over the next year as the EBITDA multiple expands reflecting the company’s blue chip status, reduced regulatory risk, and continued consistent growth.

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.  Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.