Analyst: NBC Upside Could Add $4 to Comcast's Stock
Wells Fargo's Marci Ryvicker says NBCUniversal's broadcast business has "the greatest potential upside" and could provide 20 cents per share of incremental earnings.
NEW YORK - Wells Fargo analyst Marci Ryvicker said Wednesday that the NBC broadcast business could contribute 20 cents per share of incremental profit to NBCUniversal owner Comcast and boost the cable giant's stock by $4 over time.
The NBC network and TV stations in fact have "the greatest potential upside" for NBCUniversal and its owner, she argued.
Ryvicker cited the opportunity for a ratings turnaround at NBC, future retransmission consent fees from cable and satellite TV distributors and station reverse compensation as key upside opportunities for NBCUniversal, which could contribute to Comcast's earnings and stock price. Plus, she said Wall Street isn't giving Comcast shares credit yet for the entertainment arm's deals with Netflix and other digital distributors.
"Despite the fact that NBCUniversal is a relatively small portion of Comcast, comprising just about 20 percent of estimated 2011 operating cash flow per our estimates, this segment has been a significant investor focus since first-quarter earnings," Ryvicker wrote in a report Wednesday. "We see an incremental 20 cents in earnings per share and roughly $4 in equity value from JUST this segment ALONE."
Reiterating her "outperform" rating on Comcast's stock and her $32-$34 target price, she said that the investment community "implicitly understands" that there is upside potential to NBCUni as it is now run by a media company rather than an industrial conglomerate.
"Yet the stock does not act like it (down 6 percent since the May 4 earnings report, versus the S&P 500, down 4 percent) - we think because such potential upside has been difficult to quantify and time," Ryvicker said.
Ryvicker said that an increase in NBC ratings could move the network from the fourth to the number three spot in viewers 18-49, which could mean $543 million in revenue and 4 cents per share in added profit. That could also add 83 cents to Comcast's stocks price, she said.
Comcast and NBCUniversal top executives have repeatedly said they expect an NBC turnaround to take years. The Voice has been one new NBC show that has seen strong ratings.
Meanwhile, retransmission consent fees could provide an incremental 4 cents of earnings per share and $1.05 in stock value, according to Ryvicker who expects that NBC will start receiving real retrans money for its 10 owned and operated stations in 2013.
Reverse compensation from stations could provide 10 cents of earnings per share and $1.90 of stock value, the analyst added.
Finally, Wall Street is "overlooking incremental deals with Netflix and other online video distributors," which could add another 2 cents per share in profit and 30 cents to Comcast's stock, Ryvicker argued.
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