Undervalued Comcast Is a Telecom to Watch

Michael Hodel: Comcast is one of our favorite companies in the U.S. telecom industry, and in fact, it's the only firm in the industry that we rate wide moat. The basis for our wide moat rating stems primarily from the strength of the firm's core cable business, where we think its networks provide it with a huge advantage versus its primary rivals, the fixed-line phone companies. We do think wireless service presents a little bit of a threat to Comcast cable business, but we also think Comcast has an opportunity to punch back against wireless by entering the wireless business itself.

NBCUniversal also makes up a big part of Comcast. We don't think NBCU is as well positioned as the core cable business, but we still like what Comcast has done with NBCU over the last several years, building out very well-positioned content franchises and building platforms to monetize those franchises effectively.

The biggest misstep we see for Comcast here recently was its bid for Sky. We think that Comcast overpaid for Sky a little bit. We like the Sky assets. We think they complement NBCUniversal well, but we do think that Comcast paid too much for that business.

Comcast trades at about a 10% discount to our $42 fair value estimate, which isn't as big of a discount as we've seen over the past couple of months when the bidding for Sky and Fox really heated up. The shares offered a compelling opportunity. We don't think that opportunity is as compelling today, but we still think Comcast shares are attractive here at about $38 a share.