Bank of America upgrades Comcast, saying it is 'poised for a strong turnaround'

Published Mon, May 1 20238:49 AM EDT

Bank of America is upbeat on shares of legacy media company Comcast as its latest quarter provided evidence that a turnaround is nearing. The firm upgraded the stock to buy from neutral on Monday and set a $49 per share price target, up from $44. That equates to a roughly 18% gain from Friday's $41.37 closing price. Shares of Comcast have added 18.3% since the start of the year. Bank of America analyst Jessica Reif Ehrlich highlighted the resilience of the company's media segment as a factor contributing to her upgrade. "In our view, 1Q results reflect an inflection point as we believe CMCSA's media operations are poised for a strong turnaround, while its connectivity business is benefitting from low churn, strong ARPU [average revenue per user] increases and solid Business Services growth," Reif Ehrlich said. CMCSA YTD mountain Comcast could add another 18% upside for investors after gaining as much from the start of the year, according to Bank of America. The company beat Wall Street consensus estimates for both earnings and revenue last Thursday, according to Refinitiv. Comcast earned 92 cents per share, excluding items, on revenue of $29.69 billion. The stronger-than-expected performance came even though Comcast faced headwinds in its broadband business as competition in the space heated up. Comcast had 21,000 fewer customers than it did a year earlier. The analyst also called out the strength of its animation business, which has scored several recent hits with an animated "Shrek" spinoff, "Puss in Boots: The Last Wish" and "The Super Mario Bros. Movie." "...Film is on fire, with animation exceptionally strong, which will especially benefit Peacock (where losses are peaking), but also support Theme Parks," Reif Ehrlich said. She added that there could be upside in advertising in the second half of the year. Over the weekend, the "Mario" movie became the fifth film to top $1 billion at the box office since the pandemic, and the first movie this year to hit that mark. Meanwhile, Comcast's strong balance sheet remains noteworthy, Reif Ehrlich added. She said it "will potentially benefit from a Hulu stake sale, while NBCU management changes may accelerate strategic exploration at that unit." Disclosure: Comcast owns NBCUniversal, the parent company of CNBC. — CNBC's Michael Bloom contributed to this report.