Market Scan Comcast Continues To Rise Mary Crane, 05.08.06, 12:31 PM ET
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Banc of America analyst Douglas S. Shapiro said shares of Comcast, which have risen by almost 20% over the last six weeks, should continue to rise.
"With an attractive valuation, a strong likelihood of upwards earnings revisions and a bear case not likely to get much worse near term, we think Comcast goes higher," wrote the analyst in a recent report.
Shapiro maintained a "buy" rating and price target of $37 on Comcast (nasdaq: CMCSA - news - people ), and said the stock is valued at a historical low.
Comcast, which reported a 21% increase in first-quarter operating income to $1.1 billion, has a healthy balance sheet and is well positioned for growth, Shapiro said.
At such a low valuation, the cable operator should be able to return an increasing amount of capital and is well-positioned to surpass expectations for voice-over-internet-protocol (VoIP) net adds in 2006. VoIP should drive growth through 2007, as competition continues to be more benign than feared.
Shapiro added that the downside to the Comcast story is so well known that it is already factored into Comcast's stock price.
"The bear case is so well known and articulated on Wall Street that we don't see a lot of new shoes to drop near term."
The analyst added that a big part of the bear case, the Bell companies' plans to produce on-net video, will take years to have any real effect.
For now, Shapiro said he expects Comcast to beat his earnings estimates, relative to the performance of Comcast's competitors, Cablevision (nyse: CVC - news - people ) and Time Warner (nyse: TWX - news - people ).
Continued growth should be supported by strong numbers throughout the rest of the cable sector, especially for cable operators who are ahead of the curve in the VOIP market, and continued share repurchases. Comcast has repurchased about 8% of its equity in the last two years.
DirecTV joined Comcast in Shapiro's Monday morning research note as one of his top picks in the cable and satellite television market, rated "buy" with a price target of $22 on company stock.