Comcast Stock Falls on Harvey, Competitive Worries

Strauss says op could shed 100K-150K subscribers as result of hurricane, competitive threats
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Comcast shares dipped as much as 7% in afternoon trading Thursday after a top executive told an industry audience that the impact of Hurricane Harvey and continued competitive pressures could result in the loss of 100,000-to-150,000 subscribers in the third quarter.

Comcast stock was priced as low as $38.21 per share, down 7.2% or $2.96 each in early trading Sept. 7. The stock closed at $38.60 per share on Thursday, down 6.2% or $2.57 each.

At the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Los Angeles Thursday, Comcast Cable EVP of XFinity Services Matt Strauss said the impact of the hurricane, coupled with increased competition, could be substantial.

“In Q3, you can expect to see us lose in the neighborhood of 100-to-150,000 video subs,” Strauss said. “That’s going to be partly due to competition, it’s also going to be due in part to the terrible storms that we’re seeing that are affecting two of our divisions.”

Hurricane Harvey cut a path of death and destruction through southern Texas in late August, killing about 70 people and causing billions of dollars in damage. Massive flooding hit Houston and surrounding communities the hardest, areas where Comcast has a large presence.

Comcast added about 161,000 total video customers in 2016, its first positive video subscriber growth in ten years. In the first half of the year, Comcast was still ahead of the game, gaining about 41,000 video customers in Q1 and losing 34,000 in Q2. Analysts were predicting the company would add about 10,000 video customers in the third quarter.

Traditionally, the third quarter is seasonally weak for most cable operators as customers disconnect services for their summer residences and students leave school. This time the third quarter has the added pressure of including the impact from one of the most powerful storms in decades.

Strauss added that despite those losses, Comcast will meet its financial metrics. “We’re really looking at household economics, growing ARPU and growing positive cash flow and not getting distracted by unprofitable video subs, but looking at it more through the lens of relationships,” he said.

Total customer relationships are expected to increase by about 100,000 in the quarter, he said.

Most subscriber losses due to the weather will likely return once those areas recover. And Strauss said that despite the declines, there are still growth opportunities in video.

“I do believe there is opportunity in video and we are continuing to look at video as an opportunity for us to grow,” Strauss said. “But it has to be balanced with this kind of financial discipline."

Other stocks felt the pressure as well, including The Walt Disney Co., which dropped 4.4% ($4.44 per share) to $97.06 each after chairman and CEO Bob Iger said its Star Wars and Marvel films would be included in a Disney branded direct-to-consumer service slated for 2019. Other programmers feeling the pain included: Viacom, down 3.6% ($1.02 each) to $27.20; AMC Networks, down 2.9% ($1.69) to $57.14; Discovery Communications, down 2.4% (52 cents) to $21.34, and 21st Century Fox, down 2.4% (64 cents) to $25.79 per share. Among distributors, Liberty Global shed 3.8% ($1.30) to $33.06; Altice USA dipped 3.4% ($1.04) to $29.25; Cable One was down 2% ($15.29) to $739.12 and Charter Communications DIPPED 1.7% ($6.86) to $395.64 per share

Satellite TV service Dish Network finished the day down 3.7% ($2.12) to $55.48 while telco AT&T was down 2.7% (97 cents) to $35.60 and Verizon Communications was down 1.5% (71 cents) to $46.20 per share.

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