Wells Fargo downgrades Comcast on rising costs from its mobile pivot

Investing.com -- Wells Fargo downgraded Comcast Corp (NASDAQ:CMCSA) to “Underweight” from “Equal Weight,” warning the cable giant’s shift toward mobile and broadband convergence will pressure earnings in the near term and strip the stock of its defensive appeal.

Comcast is in the early stages of a strategic pivot, aiming to bundle mobile offerings with higher-tier broadband plans in an effort to combat intensifying competition from fiber and fixed wireless providers.

While the move may help boost customer growth over time, Wells Fargo (NYSE:WFC) said the financial impact will likely be negative in the short run.

“We downgrade to Underweight as CMCSA is no longer defensive,” analysts wrote, cutting their price target to $31 from $37. Brokerage also lowered 2025 and 2026 EBITDA estimates by 5% each.

The firm pointed to parallels with Charter Communications (NASDAQ:CHTR), which saw slowing earnings growth and lower broadband ARPU during its own mobile push.

Like Charter, Comcast may need to offer free or discounted mobile lines, handset upgrades, and family plan buyouts to stimulate customer growth.

Wells Fargo expects broadband average revenue per user to dip below 3% growth by late 2025 and sees negative net adds in the core Connectivity&Platforms business through 2026.

Meanwhile, Comcast’s NBC Universal division is also under pressure from weaker ad demand, rising sports rights costs, and ongoing losses from its Peacock streaming platform.

WF foresee multiple rounds of estimate cuts as mobile convergence investments creep up, the analysts added.

Wells Fargo now values Comcast at 5.6x EV/EBITDA, down from a prior 6x, and sees Charter as the better-positioned cable play due to its earlier and more aggressive convergence strategy.