Buy on Comcast (CMCSA): I believe the market is pricing a full collapse that isn't happening (reverse DCF analysis on a company with a 25% FCF yield)

Comcast's current value is $21. My estimate of fair value is around $26-27, not crazy cheap, but I am confident i have left room for upside. They are currently paying a 6.2% dividend a year.

Comcast’s stock price only makes sense if its internet business shrinks every year, forever. The evidence says the decline is real but temporary and partly self-inflicted, so the stock looks too cheap. I broke down their valuation below.

Comcast has two parts:

\- Cable and internet (home internet, TV and mobile service): the core of the business.

\- NBCUniversal + Sky (theme parks, movie studios, NBC, Peacock): being spun off as a separate company in 2027. Valued against similar businesses, it’s worth about $51 billion.

Subtract that, and the market is valuing the whole cable business at about $108 billion. That’s roughly 3.7 times its yearly earnings, a price usually reserved for businesses in permanent steep decline.

1. What the market pays for cable

Market cap ($21.11 × 3,565M shares) $75.3B

\+ Debt and other claims +$83.8B

− NBCUniversal + Sky (being spun off) −$51.2B

= Implied value of cable business $107.8B (3.7x earnings)

2. What that buys

Free cash flow from cable: \~$14.7B a year, a 13.7% yield.

Required return: 8%.

3. Solve for the growth that makes the price fair

Value = Cash × (1 + g) ÷ (r − g)

107.8 = 14.7 × (1 + g) ÷ (0.08 − g)

g = −5.0% per year, forever

From a shareholder’s view, $3.03/share of owner cash at a 10.6% required return gives −3.3% per year, forever.

4. The full 10-year model agrees

Today’s price requires home internet earnings to:

Fall −7.9% in 2027, matching the worst recent quarter.

Still be falling −4.9% in 2036, so no recovery in a decade.

Drop from $29.5B to $20.4B by 2036, total cable earnings.

my base case for what i think is reasonable is −5% easing to −2%. That’s worth $140B vs $108B, or $30 vs $21 a share.

**So - Reverse DCF finds that the market is pricing a 8-5% loss every year with 0 recovery. Heres why I believe that is unreasonable.**

1. The math needs 10 straight years of price cuts.

The price implies residential earnings fall 46% by 2036. Customer losses (\~2% a year) explain only about 18% of that. The rest requires the average bill to fall about 4% every year for a decade. Comcast has historically raised prices 3–5% a year.

2. Today’s price drop is a one-time step.

Comcast skipped its 2026 price increase and gave away free mobile lines. A one-time cut makes revenue look lower than last year for four quarters, then the comparison resets. The free lines start becoming paid in the second half of 2026.

3. Customer losses have a floor.

Penetration is about 50% today against an estimated long-run \~47%. That’s a one-time loss of about 6% of customers, not a decline that compounds forever.

4. Growth elsewhere makes the bear math harder each year.

Business internet (20% of cable earnings, +5% a year) and mobile are growing. To keep total cable at −5%, residential would have to fall faster every year: about −7.6% now, rising to about −11.7% by year 10.

5. The biggest drag shrinks itself away.

Cable TV is low-margin and falling about 8% a year. The smaller it gets, the less it subtracts.

Bottom line is that the likely path is a 2026–27 reset, then a smaller, stable business, worth about $26–30 a share vs. $21 today. This is wrong if prices are still falling in 2027 after these one-time effects have passed.

Happy to discuss further, or share more of my research and model that I did not include. As always not investment advice, just research.