Pali analyst takes Comcast to task

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After falling 35% in 2007, shares of Comcast -- as of Thursday -- were already off an additional 5% so far this year -- and the year was only 2 trading days old.

The culprit for the recent fall is probably the negative comments issued by Pali Research analyst Richard Greenfield, who on Wednesday cut his estimates on the company for 2007 and 2008.

After the final 2007 numbers come in, Greenfield expects Comcast to have earned 69 cents per share, down from his previous estimate of 72 cents a share. For 2008, he slashed his estimate to just 76 cents a share from his previous prediction of 91 cents. Greenfield notes that Comcast has twice cut its free-cash-flow estimates for 2007, going from about flat to down 20%.

"While lowering free-cash-flow guidance is not historically unusual even for Comcast, we have been genuinely surprised by the speed and magnitude of the reductions in the last few months," Greenfield said.

Greenfield further notes that his 2008 free-cash-flow estimate has now dropped from $4 billion to $2.5 billion, about a 37.5% decline, almost mirroring the stock's 35% swoon last year.

Greenfield expects that new Comcast CFO Michael Angelakis will give his first full-year guidance when Comcast next reports its quarterly earnings.

"We believe Comcast is likely to take a more conservative approach to guidance, especially as the competitive threats to its business intensify in 2008," Greenfield said. "Management needs to start meeting/exceeding guidance vs. failing to live up to an overly aggressive bar."

Greenfield sees capital expenditures rising modestly or being flat in 2008 as Comcast pushes digital boxes. That estimate, though, assumes no significant ramp-up in wireless spending nor a more aggressive approach to Comcast's Internet strategy.

While Greenfield is "neutral" on Comcast, the analyst is quite bullish on Cablevision, a much smaller player in the cable TV arena.

In a research note last month laying out his reasons "why you should buy Cablevision," the analyst said the company is "generating lots of cash, but nobody cares."

Greenfield has a $47 target on Cablevision shares, which closed Thursday at $23.41. He argues the stock is cheap due to worries the company won't use its cash in investor-friendly ways. But, he says, the company could pay investors $10 a share in dividends over the next two years with that cash or it could repurchase shares, both of which are bullish scenarios.
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