Schaeffer's Trading Floor Blog

Weekly Contrarian: Don't Count Comcast Corporation (CMCSA) Out

CMCSA has rallied amid a lack of believers

by 9/6/2013 11:34 AM
Stocks quoted in this article:

Despite fears that online options will be the death of cable, Comcast Corporation (NASDAQ:CMCSA) "has thrived in recent years, thanks to its Internet offerings and focus on small business," notes this Barron's column (subscription required). In addition, while there's undoubtedly a decline among traditional cable subscribers, CMCSA has managed to slow the proverbial bleed by signing up more people for phone and online services.

As far as CMCSA shares are concerned, the stock has outperformed the S&P 500 Index (SPX) during the past year, and is now at 15 times forward earnings -- "reasonably priced," the author opines. In fact, "Comcast is trading at a discount to its historical levels as well as to the industry." Against this backdrop, and considering its built-in customer base and innovation, the company looks "well positioned to hold on to its subscribers even as the entertainment landscape changes."

Contrarian Perspective

CMCSA has added 22.8% over the past year, and touched a record high of $46.33 in early August. Since then, the stock has backpedaled to test its 40-week moving average, which acted as a launching pad in late June.

Despite the stock's technical and fundamental prowess, pessimism still plagues CMCSA. Short interest rose 7.2% during the most recent reporting period, and now represents 25.29 million CMCSA shares.

Plus, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.17 registers in the 71st percentile of its annual range. In other words, option buyers have purchased CMCSA puts over calls at a faster-than-usual clip during the past two weeks, pointing to escalating bearishness in the options world.

Should Comcast Corporation (NASDAQ:CMCSA) bounce off trendline support and resume its quest for new highs, an unwinding of skepticism on Wall Street could translate into a contrarian tailwind for the nation's largest cable provider.


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