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Comcast has 15 billion in net income last quarter whereas Netflix had 185 million. And PE ratio of comccast is 19 whereas Netflix is 188. In the future where th

Comcast has 15 billion in net income last quarter whereas Netflix had 185 million. And PE ratio of comccast is 19 whereas Netflix is 188. In the future where the cord cutting trend continues and Netflix gains tons of subscribers the valuation might make sense. But for now, I feel this looks like very overvalued.

josefresco 8y ago
I'm not sure "cord cutting" will help Netflix as much as some may thing. Netflix is already a very popular service, and one that many subscribe to alongside their traditional cable TV service. The new batch of streaming "live TV" providers are the ones looking at massive growth. I do think Netflix will benefit indirectly as people break their "addiction" to traditional TV - but it's not a replacement for live TV (yet) Does Netflix have a "live tv" strategy? Hulu currently offers one (although I ended up dropping it due to their hobbled DVR)
organsnyder 8y ago
Sounds like a good time to buy Comcast stock, and/or short Netflix stock. I'm no fan of Comcast (I've been trolling my city's building permit listings, drooling over the small fiber providers inching closer to my neighborhood), but they do still own a ton of physical infrastructure, as well as a massive IP library. Netflix has branding and momentum on their side, but they're also in a much more fragile position.
- bytematic 8y ago
  That might make sense from a mathematical perspective but something still needs to drive the price up or down, fundamentals alone don't always.
  - solarkraft 8y ago
    All I know about Warren Buffet's investing is that he takes a lot of time to come up with a sane, realistic valuation of a company. It seems to have worked for him.
VikingCoder 8y ago
Eating manure has 15 billion in net income last quarter, whereas this new "filet mignon" had 185 million. Just because people are currently eating shit a lot doesn't mean the outlook for them is any good.
- paulddraper 8y ago
  According to those numbers, lots more people want shit, or they are willing to pay more for it. Not sure what you're getting at. P.S. A little thing called "sports" is compatible with shit, but not filet mignon. And after years filet mignon has make negligible progress in this area. Also, filet mignon is shipped inside shit tubes, and probably will be for a very long time. P.P.S. I hate shit analogies.
  - VikingCoder 8y ago
    Shit's been around a long time. People are just learning about filet mignon. And not everyone has the equipment to have it properly prepared at home, yet. As people get that equipment, look for sales of shit to drop.
scarface74 8y ago
The whole idea of "cord cutting" hurting cable is insane. If you don't subscribe to cable and you subscribe to internet based streaming services, you're still getting content delivered to your home via either a cable "cord" or the phone company. Netflix at most gets $12/month per subscriber. Comcast will get $80 - $110/month for internet service. Comcaast also has either no competitors in their market or at most one. Comcast owns NBC and bunch of cable companies and has an ownership stake in Hulu. Comcast gets your money either way. Netflix has to spend money on content and only has one way to recoup the cost -- subscriptions. Comcast also produces content via its TV and movie studios but makes money off of content via broadcast networks, cable companies, video on demand, and licensing to streaming companies and pay tv.
- damieng 8y ago
  Not sure where you get the monthly internet pricing from but my 250MB Comcast is $59.99 a month and 150MB Frontier is $40 a month.
  - 49bc 8y ago
    Two choices for high speed, wired internet? Outside of a few major cities, that’s actually very rare.
  - shados 8y ago
    After fees, taxes and all of the bullshit increases year after year, Comcast charges me 107$/month for 25mb (yeah, I'm not forgetting a zero). They have no competition where I am (the competitor serves across the street but won't do our building even though we agreed to fund the infrastructure). Advertised rate is half that. It's a scam.
- lallysingh 8y ago
  Comcast has a very capital-heavy business, and their biggest competitor is the cell network. They have poor customer sentiment, and their existing capital is an aging dinosaur waiting to die.
  - 8y ago
seanmcdirmid 8y ago
Valuations are based more on predictions of future performance, not based on current already known performance. The market just thinks Comcast is a falling star and Netflix is a rising one.
gascan 8y ago
Is there some kind of price to tangible assets ratio? Because I suspect Comcast has Netflix beat handily there as well.
ukulele 8y ago
Using PE ratio to compare a high growth company to a low growth company is almost never a good idea. You're penalizing Netflix for investing in its business. When people refer to short term Wall Street silliness, this is the kind of thing they mean.
Karishma1234 8y ago
Comcast's net profits per subscription is $5 per month. So Comcast on an average makes $60 profit per subscriber. I will not be surprised if Netflix would hit that goal in next 2 years or so. After all profits is what matters and not net income. Comcast has to employ thousands of support people in India, thousands of technicians all across the USA, cut deals with city administrations, ply those cable lying vans and what not. It is sad that despite all this Herculean work Comcast gets bad rep and very little profits.
- pishpash 8y ago
  Billions of dollars of earnings per quarter is "very little profits" -- okay. If that's too little on account of costs, Comcast can feel free to find ways to reduce costs or innovate, you know, like Netflix.
  - Karishma1234 8y ago
    Or they might start a Oil refinery or brothels in Amsterdam or a start selling aspirin ? Why do I care what they do. I am only pointing out that Comcast has huge operational and capital expenditure compared to Netflix. It is not some value judgement on who is better. BTW Comcast has reduced its expenditure considerably by moving nearly 80% of its support jobs to India.
tacogordito 8y ago
The market values the future not the present. Heard this argument about Amazon going back over 10 years. I've come to the conclusion that when a general consensus is that stock XYZ is overvalued, its usually a great buy.
- pishpash 8y ago
  That's called survival bias.
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jfindley 8y ago
Comcast is more or less limited to customers where it currently has cables in the ground - which is a subset of the US population. To grow its customer base, it has to lay more cable, or enter into agreements with existing cable operators. Netflix is present in around 200 countries around the world, some of them with significantly higher population than the US, and is available to anyone with an internet connection of some description. It's very possible that the valuation is in large part because of this potential.
deleted 8y ago
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matte_black 8y ago
The mistake you are making is not taking into account forward earnings. Your reasoning may have worked in the past but tech companies and the markets these days are different. When you take forward earnings seriously, all these valuations start looking reasonable. Why pay $40 for Netflix stock today if it’s damn near guaranteed to be a massive business in the future? You will pay $350+. Why aren’t we paying $350+ for Comcast if it has 81x the net income of Netflix? Because Comcast is going down the shitter.
partycoder 8y ago
Consider that Comcast operates exclusively in the US whereas Netflix operates globally. This also gives Netflix more room for growth compared to Comcast.
yellowboxtenant 8y ago
IT companies are valued now on what they're going to earn in 20 years.
mmanfrin 8y ago
Netflix's quarterly revenue was $3.7bil representing a 40% YoY growth, and $400mil more than their previous quarter. Additionally, their net income last quarter was $290mil, not $185mil (that was the quarter previous). Also you seem to have cherry picked quarters to compare, as last quarter Comcast actually had a net income of $3.12bil. The quarter previous was $15bil and the quarter before $2.9bil. I'm unsure what accounts for that single quarter spike, but using it as synecdochic of the whole is disingenuous at best.

josefresco 8y ago

I'm not sure "cord cutting" will help Netflix as much as some may thing. Netflix is already a very popular service, and one that many subscribe to alongside their traditional cable TV service. The new batch of streaming "live TV" providers are the ones looking at massive growth. I do think Netflix will benefit indirectly as people break their "addiction" to traditional TV - but it's not a replacement for live TV (yet) Does Netflix have a "live tv" strategy? Hulu currently offers one (although I ended up dropping it due to their hobbled DVR)

organsnyder 8y ago

Sounds like a good time to buy Comcast stock, and/or short Netflix stock. I'm no fan of Comcast (I've been trolling my city's building permit listings, drooling over the small fiber providers inching closer to my neighborhood), but they do still own a ton of physical infrastructure, as well as a massive IP library. Netflix has branding and momentum on their side, but they're also in a much more fragile position.

bytematic 8y ago
That might make sense from a mathematical perspective but something still needs to drive the price up or down, fundamentals alone don't always.
- solarkraft 8y ago
  All I know about Warren Buffet's investing is that he takes a lot of time to come up with a sane, realistic valuation of a company. It seems to have worked for him.

VikingCoder 8y ago

Eating manure has 15 billion in net income last quarter, whereas this new "filet mignon" had 185 million. Just because people are currently eating shit a lot doesn't mean the outlook for them is any good.

paulddraper 8y ago
According to those numbers, lots more people want shit, or they are willing to pay more for it. Not sure what you're getting at. P.S. A little thing called "sports" is compatible with shit, but not filet mignon. And after years filet mignon has make negligible progress in this area. Also, filet mignon is shipped inside shit tubes, and probably will be for a very long time. P.P.S. I hate shit analogies.
- VikingCoder 8y ago
  Shit's been around a long time. People are just learning about filet mignon. And not everyone has the equipment to have it properly prepared at home, yet. As people get that equipment, look for sales of shit to drop.

scarface74 8y ago

The whole idea of "cord cutting" hurting cable is insane. If you don't subscribe to cable and you subscribe to internet based streaming services, you're still getting content delivered to your home via either a cable "cord" or the phone company. Netflix at most gets $12/month per subscriber. Comcast will get $80 - $110/month for internet service. Comcaast also has either no competitors in their market or at most one. Comcast owns NBC and bunch of cable companies and has an ownership stake in Hulu. Comcast gets your money either way. Netflix has to spend money on content and only has one way to recoup the cost -- subscriptions. Comcast also produces content via its TV and movie studios but makes money off of content via broadcast networks, cable companies, video on demand, and licensing to streaming companies and pay tv.

damieng 8y ago
Not sure where you get the monthly internet pricing from but my 250MB Comcast is $59.99 a month and 150MB Frontier is $40 a month.
- 49bc 8y ago
  Two choices for high speed, wired internet? Outside of a few major cities, that’s actually very rare.
- shados 8y ago
  After fees, taxes and all of the bullshit increases year after year, Comcast charges me 107$/month for 25mb (yeah, I'm not forgetting a zero). They have no competition where I am (the competitor serves across the street but won't do our building even though we agreed to fund the infrastructure). Advertised rate is half that. It's a scam.
lallysingh 8y ago
Comcast has a very capital-heavy business, and their biggest competitor is the cell network. They have poor customer sentiment, and their existing capital is an aging dinosaur waiting to die.
- 8y ago

seanmcdirmid 8y ago

Valuations are based more on predictions of future performance, not based on current already known performance. The market just thinks Comcast is a falling star and Netflix is a rising one.

gascan 8y ago

Is there some kind of price to tangible assets ratio? Because I suspect Comcast has Netflix beat handily there as well.

ukulele 8y ago

Using PE ratio to compare a high growth company to a low growth company is almost never a good idea. You're penalizing Netflix for investing in its business. When people refer to short term Wall Street silliness, this is the kind of thing they mean.

Karishma1234 8y ago

Comcast's net profits per subscription is $5 per month. So Comcast on an average makes $60 profit per subscriber. I will not be surprised if Netflix would hit that goal in next 2 years or so. After all profits is what matters and not net income. Comcast has to employ thousands of support people in India, thousands of technicians all across the USA, cut deals with city administrations, ply those cable lying vans and what not. It is sad that despite all this Herculean work Comcast gets bad rep and very little profits.

pishpash 8y ago
Billions of dollars of earnings per quarter is "very little profits" -- okay. If that's too little on account of costs, Comcast can feel free to find ways to reduce costs or innovate, you know, like Netflix.
- Karishma1234 8y ago
  Or they might start a Oil refinery or brothels in Amsterdam or a start selling aspirin ? Why do I care what they do. I am only pointing out that Comcast has huge operational and capital expenditure compared to Netflix. It is not some value judgement on who is better. BTW Comcast has reduced its expenditure considerably by moving nearly 80% of its support jobs to India.

tacogordito 8y ago

The market values the future not the present. Heard this argument about Amazon going back over 10 years. I've come to the conclusion that when a general consensus is that stock XYZ is overvalued, its usually a great buy.

pishpash 8y ago
That's called survival bias.

deleted 8y ago

[deleted]

jfindley 8y ago

Comcast is more or less limited to customers where it currently has cables in the ground - which is a subset of the US population. To grow its customer base, it has to lay more cable, or enter into agreements with existing cable operators. Netflix is present in around 200 countries around the world, some of them with significantly higher population than the US, and is available to anyone with an internet connection of some description. It's very possible that the valuation is in large part because of this potential.

deleted 8y ago

[deleted]

matte_black 8y ago

The mistake you are making is not taking into account forward earnings. Your reasoning may have worked in the past but tech companies and the markets these days are different. When you take forward earnings seriously, all these valuations start looking reasonable. Why pay $40 for Netflix stock today if it’s damn near guaranteed to be a massive business in the future? You will pay $350+. Why aren’t we paying $350+ for Comcast if it has 81x the net income of Netflix? Because Comcast is going down the shitter.

partycoder 8y ago

Consider that Comcast operates exclusively in the US whereas Netflix operates globally. This also gives Netflix more room for growth compared to Comcast.

yellowboxtenant 8y ago

IT companies are valued now on what they're going to earn in 20 years.

mmanfrin 8y ago

Netflix's quarterly revenue was $3.7bil representing a 40% YoY growth, and $400mil more than their previous quarter. Additionally, their net income last quarter was $290mil, not $185mil (that was the quarter previous). Also you seem to have cherry picked quarters to compare, as last quarter Comcast actually had a net income of $3.12bil. The quarter previous was $15bil and the quarter before $2.9bil. I'm unsure what accounts for that single quarter spike, but using it as synecdochic of the whole is disingenuous at best.