Comcast Corporation (NASDAQ:CMCSA) and The Walt Disney Company (NYSE:DIS) have both had a rough few years. Comcast is down about 62% over the past five years, while Disney has roughly halved from its March 2021 level. Neither decline is particularly surprising once you look at what has happened to their businesses.
Cable television is disappearing. Broadband competition is getting tougher. Streaming has required billions of dollars of investment, while Hollywood has become less predictable. Even theme parks, one of Disney’s strongest businesses, are dealing with softer international demand.
As a result, both stocks now look cheap. Comcast trades at just 5.93x forward earnings, while Disney trades at 13.81x. The obvious question is whether investors are looking at genuine value or simply putting a low price on businesses whose best days are behind them.
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Comcast Has a Real Problem. But It May Also Have a Way Out
Comcast’s biggest problem is broadband.
The company lost 167,000 broadband subscribers in the second quarter, while fiber, fixed wireless and satellite providers continue to make the market more competitive. Comcast’s broadband average revenue per user, or ARPU, also fell 3.8% as the company deliberately changed its pricing strategy.
That is the part of the Comcast story that makes the 5.93x multiple look less crazy. A cheap stock isn’t necessarily cheap if the underlying business is slowly shrinking.
But there are some signs that Comcast Corporation is trying to change the trajectory rather than simply defend the old cable business.
Its wireless operation crossed 10 million lines, yet that represents only about 7% of the potential wireless market within its footprint. More importantly, 448,000 net wireless lines were added in the quarter, a company record. Comcast is effectively using its existing broadband relationships to sell another service to the same customers.
The other interesting piece is Peacock. Comcast’s streaming service finally became profitable, generating $189 million of EBITDA, while paid subscribers reached 48 million.
None of this fixes broadband overnight. But it does mean the Comcast story is no longer simply “cable is dying.”
Disney’s Problem Is Different
Disney’s challenge is less about one collapsing business and more about transitioning a colossal entertainment empire into the streaming era.
The good news is that the transition is finally starting to show up in the numbers.
Disney’s streaming business generated a 13% operating margin in the latest quarter, and management expects double-digit margins for fiscal 2026. That’s a meaningful change from the years when Disney+ was primarily viewed as an expensive race for subscribers.
But streaming isn’t the entire story.
The Walt Disney Company’s real advantage is the ability to take a successful character or story and make money from it in several different places. A movie can become a streaming title, merchandise, a theme-park attraction, or even part of a cruise experience.
Take Toy Story. The franchise has generated more than $4 billion at the global box office, but Disney says it has also generated more than $1 billion in annual retail sales and exists across its parks and cruise ships.
That is much harder to replicate than simply having another streaming library.
The company is also seeing strong results from its parks. Experiences revenue reached $10 billion in the latest quarter, up 10%, while global guests increased 4%.
The problem is that Disney still has a declining traditional television business to manage, and the company is restructuring that side of the business as viewers continue moving toward streaming.
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Value Trap or Real Value?
This is where I think the two stocks diverge.
Comcast is cheaper, but investors need to believe its broadband decline can stabilize while wireless, enterprise connectivity, and the post-spin-off businesses provide new sources of growth. Management is already seeing broadband losses improve year over year, while wireless is scaling rapidly.
Disney costs more, but its turnaround is arguably further along. Streaming is becoming profitable, parks are producing strong growth, and the company is increasingly trying to connect its businesses rather than operate them as separate pieces.
Neither looks risk-free. Comcast could remain trapped in a declining broadband business (which still accounts for a fifth of the company’s revenue) for longer than investors expect. Disney still has to prove that its huge content spending can consistently produce attractive returns.
But there is a reason these stocks are interesting at today’s prices. Investors aren’t being asked to pay for flawless execution. They are paying relatively little for Comcast’s earnings and a modest multiple for Disney’s transition.
Market sentiment
Hedge fund sentiment moved in opposite directions for the two companies, according to Insider Monkey’s database. Disney fell from 119 hedge funds in Q1 to 98 in Q2, while the value of those positions declined from about $6.9 billion to $5.7 billion. Comcast, meanwhile, rose from 78 funds to 82, with the value of hedge fund holdings increasing from roughly $3.5 billion to $3.9 billion.
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This article is originally published at Insider Monkey.
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