How Will NBCUniversal's Olympics Deal Affect Comcast's Stock?

6:41 AM PDT 6/8/2011 by Georg Szalai

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One analyst says that it will lower his Comcast valuation by $430 million or less through 2020, calling the impact "very minor" at less than 1 percent of his current stock target price.

NEW YORK - Wall Street observers on Wednesday continued to weigh in on Comcast-controlled NBCUniversal's $4.38 billion Olympics deal, with at least two analysts suggesting that investors can relax despite the high price tag.

Barclays Capital analyst James Ratcliffe said that the company is paying a full price to extend its Olympics rights through 2020, but estimated little impact on Comcast's valuation.

"While we don't believe that the rights were obtained at a bargain price, the valuation impact is very minor," he said in a report in maintaining his "equal weight" rating and $27 price target on Comcast shares. "Using highly conservative assumptions, we estimate the impact of this Olympics deal (versus not having the Olympics at all) at approximately 15 cents per Comcast share, or well under 1 percent of our $27 target price."

Ratcliffe's calculation is based on an estimated that Summer Games generate approximately $900 million in profit before the cost of broadcast rights, while Winter Games generate about $600 million.

"Even assuming these figures don't grow at all (a very conservative assumption, in our view), we estimate that this deal lowers our Comcast valuation by $430 million over the entire life of this new contract," Ratcliffe concluded.

Meanwhile, UBS analyst John Hodulik said that the Olympics deal and news earlier this week that NBCUniversal is buying full control of a theme park venture should encourage Comcast investors and wipe out recent concerns.

"Comcast shares have been under pressure likely due to increased investment in programming and worries regarding the theme park deal and Olympic bid," he said. "With the $1 billion deal for the theme parks coming at a reasonable...multiple and price paid for the Olympics similar to past deals, we believe many of the worries can be put to rest."

Maintaining his $30 price target on the stock, he said "we continue to believe Comcast shares represent solid value."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai