Last week, a fellow contributor to Street Insight, Jeff Bagley, noted via his personal experience how powerful Verizon’s all fiber strategy will be in the competition for broadband subscribers. I can’t really argue with his opinion but I do think that for the time being that news is deeply discounted in Comcast (CMCSA/CMCSK) shares. For that reason, I remain on the other side of the trade from Jeff as a CMCSA long. My thesis remains that the valuation of CMCSA will rise this year as the company gains benefits in cash flow growth, subscriber growth, and churn from its rollout of VOIP telephony. As this occurs I think the street’s concerns about the long-term challenge from RBOC fiber will temporarily recede. I take it as a good sign that after closing at a 52 week low on December 30th, CMCSA shares have rallied steadily and significantly this year, rising 8.7% so far. If CMCSA comes through with solid 4Q05 earnings and provides comforting guidance when it reports I think the gains will continue with the stock ultimately reaching its summer of 2005 highs around $32.
One thing that may have helped the shares recently is a receding threat from a la carte (here and here). Earlier this week, the Senate Commerce Committee held hearings on this issue and according to Blair Levin at Stifel Nicholaus, Senators indicated that for the next few months at least legislation was off the table. The Senators seemed appeased by the introduction of family tiers by leading cable companies in December. However, Blair noted that they also indicated that if the new tiers prove unpopular the legislative option would reemerge. I suspect the they will prove unpopular so I do not expect this issue to go away forever, but for now at least there is one less thing for cable longs or potential longs to be concerned about.