Comcast Stock Upgraded, “Bearish on NBCU” Analyst – The Hollywood Reporter

Comcast received an upgrade from Wells Fargo analyst Steven Cahall, who upgraded his stock’s rating from “underweight” to “balanced” on Monday despite a bearish outlook for the entertainment unit. location of cable, media and technology giant NBCUniversal. He also increased his stock price target for the company led by Chairman and CEO Brian Roberts, from $8 to $38.

“We’re less negative on Comcast’s cable outlook with slower earnings before interest, taxes, depreciation and amortization (EBITDA) growth, but capital expenditures (capex),” he explained. also clearer. “We are more negative for NBCU and below the Street in terms of free cash flow. Net/net, we now consider Comcast risk-free and fair value around $38.”

Cahall said he’s “moving NBCU to a bearish media outlook,” explaining: “We’re cutting more aggressively than the numbers at NBCU to roughly 7% of the annual sub-drop, weakness in entertainment distributed advertising prices (recession, AVOD) and the highest loss in Con Cong. Our NBCU adjusted EBITDA for 2023/24 is $4.6 billion/$5.9 billion, 25 percent/9 percent below St. NBCU EBITDA’s 19 percent drop in ’23 is similar to what we estimate for peers like Disney’s Linear Network, Warner Bros. Discovery’s network, excluding synergies, and Paramount Global TV Media. We’re resetting our old theme parks valuing our NBCU to approximately seven times enterprise value/EBITDA, which is consistent with our view of Warner Bros. Discovery and Paramount, reflect difficult linear themes and improve more slowly when streaming.” And he noted: “We’re not sure when Peacock will break even.”

Even so, the Wells Fargo analyst noted that “a lot of NBCU options.” “While we are underestimating NBCU’s operating trends, we think it will benefit from Comcast’s strong balance sheet,” he wrote. “The media sector is entering a challenging period with weaker streaming results and a much faster linear decline. While we think NBCU faces those challenges, it could opportunistically leverage Comcast’s strong balance sheet.” And he emphasized: “Comcast’s strong balance sheet gives it options for NBCU that its peers lack.”

Cahall then provides some color and examples of what such opportunities might look like. For example, the NBCU could add “the sports rights become unsuitable for colleagues,” he argued, while also referring to the NBA “in the short term, possibly the NFL in the longer term.” The analyst added that Comcast/NBCU will also likely “push to buy Hulu from Disney, which is more likely due to regulatory changes.” Finally, he noted that the company will likely “patiently assess consolidation opportunities.”

Wall Street experts are less negative on the core Comcast cable business despite the many challenges. “We have been pursuing Comcast for a long time. Cahall writes, predicting “moderately negative” broadband network additions in 2023 and higher video losses ahead. “While broadband competition is on the rise, it’s not creating all of the bad trends we’re concerned about. ARPU is holding up better and we think it will benefit from cord cuts” and other trends, he concluded, adding that capital investment is “much lower than previously feared.” ours”.

Cahall concludes: “The result is a less negative outlook for free cash flow… More clarity on free cash flow helps us to be more constructive. … NBCU is likely to be a drag, but in our view, there is enough free cash flow support.”

Comcast shares were up more than 1 percent in pre-opening trading on Monday at $36.28.


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