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Comcast vs. Warner Bros. Discovery: Which Entertainment Stock is a Better Buy?

By Nimesh Jaiswal

Comcast Corporation (CMCSA) in Philadelphia, Pa., operates as a media and technology company worldwide. It operates through Cable Communications; Media; Studios; Theme Parks; and Sky segments. In comparison, Warner Bros. Discovery, Inc. (WBD) in New York City is a media company that provides content across various distribution platforms in approximately 50 languages worldwide. It also produces, develops, and distributes feature films, television, gaming, and other content in different physical and digital formats

Despite the recent COVID-19 spike and inflation concerns, entertainment providers are in high demand due to the rising trend of watching videos and other content online. Furthermore, advancements in Web3 and growing internet penetration across the globe are expected to drive the entertainment industry's growth. 

According to a report by Market Reports World, the global entertainment and media market is expected to grow at a CAGR of 5.9% between 2022 and 2028. Therefore, both CMCSA and WBD should benefit.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On May 10, 2022, CMCSA announced that its board of directors declared a quarterly dividend of $0.27 per share on its common stock. The quarterly dividend is payable on July 27, 2022, to shareholders of record as of the close of business on July 6, 2022.

On May 10, 2022, WBD and Roku, Inc. (ROKU) announced that discovery+, the definitive non-fiction, real-life subscription streaming service, has launched as a Premium Subscription on The Roku Channel. Gabriel Sauerhoff, SVP of Digital Distribution and Commercial Partnerships, WBD, said, "We're pleased to deepen our relationship with Roku, a valued partner, and expand access of discovery+ on the Roku platform through the launch on The Roku Channel."

Recent Financial Results

CMCSA’s revenue increased 14% year-over-year to $31.01 billion for its fiscal first quarter, ended March 31, 2022. The company’s adjusted net income grew 10.5% year-over-year to $3.90 billion. Also, its adjusted EPS came in at $0.86, up 13.2% year-over-year.

WBD’s revenues increased 13% year-over-year to $3.16 billion for its fiscal first quarter, ended March 31, 2022. The company’s net income grew 225.7% year-over-year to $456 million. Also, its EPS came in at $0.69, up 228.6% year-over-year.

Past and Expected Financial Performance

CMCSA’s revenue and total assets have grown at CAGRs of 6.8% and 2.3%, respectively, over the past three years. Analysts expect CMCSA’s revenue to increase 5.5% in its fiscal year 2022 and 1.7% in its fiscal 2023. The company’s EPS is expected to grow 9.5% for the quarter ending June 30, 2022, and 11.8% in its fiscal 2022. Furthermore, its EPS is expected to grow at a 13.5% rate per annum over the next five years.

In comparison, WBD’s revenue and total assets have grown at CAGRs of 4.7% and 1.4%, respectively, over the past three years. The company’s revenue is expected to increase 276.4% in its fiscal 2022 and 10.5% in fiscal 2023. However, its EPS is expected to decline 101.1% for the quarter ending June 30, 2022, and 71.8% in fiscal 2022. WBD’s EPS is expected to increase at a 7.4% rate per annum over the next five years.

Profitability

CMCSA’s trailing-12-month revenue is 9.57 times what WBD generates. CMCSA is also more profitable, with gross profit and net income margins of 66.64% and 11.96%, respectively, compared to WBD’s 61.12% and 10.53%.

Furthermore, CMCSA’s 14.67%, 4.83%, and 6.68% respective ROE, ROA, and ROTC are higher than WBD’s 11.33%, 3.90%, and 4.73%.

Valuation

In terms of forward non-GAAP P/E, WBD is currently trading at 14.40x, which is 29.7% higher than CMCSA’s 11.10x. However, CMCSA’s 7.39x forward EV/EBITDA  is 52.1% higher than WBD’s 4.86x.

POWR Ratings

CMCSA has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. In contrast, WBD has an overall rating of C, which translates to a Neutral. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

CMCSA has a B grade for Stability, which is in sync with its 0.93 beta. In comparison, WBD has a C grade for Stability, which is consistent with its 1.13 beta.

Of the nine stocks in the Entertainment - TV & Internet Providers industry, CMCSA is ranked first. However, WBD is ranked #4 out of 21 stocks in the Entertainment - Media Producers industry.

Beyond what I have stated above, we have also rated the stocks for Growth, Value, Quality, Momentum, and Sentiment. Click here to view all the CMCSA ratings. Also, get all the WBD ratings here.

The Winner

Since the entertainment industry is expected to grow exponentially due to the increasing adoption of smart homes and advancements in television technology, both CMCSA and WBD should benefit. However, it is better to bet on CMCSA now because of its higher profit margin and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Entertainment - TV & Internet Providers industry here. Also, click here to access all the top-rated stocks in the Entertainment - Media Producers industry. 


CMCSA shares were trading at $41.32 per share on Friday afternoon, down $0.07 (-0.17%). Year-to-date, CMCSA has declined -17.03%, versus a -15.68% rise in the benchmark S&P 500 index during the same period.



About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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