As you might suspect, media giant Comcast (NASDAQ:CMCSA) did not have a good day during the midweek session. Despite many high-level efforts to calm the markets and instill confidence in the economy, the benchmark indices have again printed dark red ink. For Comcast stock, the session saw a loss of nearly 7%. Although it’s difficult to see right now, I believe that longer term, CMCSA offers a viable contrarian opportunity.
First, let me acknowledge the seriousness of the coronavirus from China. At the time of writing, the total U.S. infection cases have soared to over 13,600 with 200 deaths. Given that we’re relatively early into our infection phase, these numbers will surely jump higher. Further, the public feels a growing sense of anxiety that is further exacerbated by multiple businesses shutting down.
Similar to many apocalyptic movies, we are now living a new normal. However, I wish to strongly emphasize that this too shall pass. Also, this sentiment is one of the reasons why I’m bullish on Comcast stock.
In ordinary circumstances, you would be optimistic about CMCSA’s gradually shifting relevance. Like Disney (NYSE:DIS), Comcast features a multivariate business, ranging from traditional media to theme parks to its streaming platform. And as Disney’s Star Wars franchise has proven, people go to the movies for films that cater to the big screen experience. Certainly, CMCSA has valuable franchises under its belt, which bolsters the argument for Comcast stock.
But in this new normal, we have millions of Americans that are now sitting at home with nothing to do. Although unusual, it is a net benefit for Comcast. After all, in-home entertainment is a perfect way to drive down boredom.
One of the most shocking news items this week came from AMC Entertainment (NYSE:AMC), Cinemark (NYSE:CNK) and Regal Cinemas. Due to rising coronavirus concerns and the associated loss of revenue, the three largest cinema operators in the U.S. will temporarily go dark.
I don’t think many Americans appreciate the symbolism of this action, considering that we are rapidly transitioning to streaming platforms. During the Great Depression, the box office provided a respite to the daily struggles of suddenly displaced workers. People often talk about the golden age of Hollywood; well, it sprouted during this dark period in history.
Intuitively, escapism is a wonderful outlet during periods of pronounced stress. This was exactly the reason why the movie industry performed relatively well during the Great Recession.
Of course, people today are enjoying their escapism through their TVs, connected or otherwise. Logically, this is a big lift for Comcast stock. To be fair, the underlying company is missing out on their big movie releases. However, CMCSA shares have likely priced in this headwind. Several hotly anticipated films have announced delays to their release dates.
Furthermore, Comcast can mitigate damage thanks to its broad media exposure. Typically, your average American worker may not pay attention to cable channels like CNBC. They’re paying attention now due to the real-time drama that we’re all witnessing.
If you want a parallel, consider the 2016 election. While President Trump likes to brag about it, in a way, he’s right when he says he boosted revenue for CNN and other cable news programs. I see the same thing happening with the economic impact of the coronavirus.
Further, this is an amazing opportunity for Comcast to market its streaming platform, considering the “hostage” audience.
One of the interesting developments that I noticed was that many houses of worship have also shuttered temporarily. With the technology these days, it’s easy for religious leaders to stream their messages for either live or archived viewing.
Socially, though, what this does is completely disrupt many Americans’ weekend routine. And it further encourages people to seek respite and escapism through digital means. Again, I see this as a net positive for Comcast stock.
Furthermore, because of the hostage audience concept, CMCSA has an opportunity to sear their brand and service platforms into the minds of millions of Americans. Admittedly, it’s tough to see the positives in anything right now. But for Comcast, I think this is a classic example of an underappreciated contrarian opportunity.
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