NBCUniversal Could Become Worth More Than Time Warner, Analyst Says

8:07 AM PST 06/18/2014 by Georg Szalai
Francine Daveta/NBC

Macquarie's Amy Yong says the company's "accelerated progress has gone lost" amid corporate parent Comcast's planned acquisition of Time Warner Cable.

Macquarie Securities analyst Amy Yong on Wednesday suggested that NBCUniversal could end up being worth more than Time Warner if its recent financial and ratings momentum continues.

In a reported entitled "30 Rock > Columbus Circle?," a reference to the locations of the two entertainment giants' New York headquarters, she wrote: "NBCU’s accelerated progress has gone lost in the regulatory review process [for owner Comcast's planned acquisition of Time Warner Cable]. If broadcast ratings continue their upward trajectory, rebranding efforts at cable networks resonate and film/theme parks layer on additional franchises, NBCU could be worth $50 billion and more than Time Warner."

As of early Wednesday, Time Warner's market value stood at slightly more than $60 billion.

Yong reiterated her "neutral" rating on Comcast stock on Wednesday, but said: "We are growing increasingly constructive on Comcast shares as we cross the M&A finish line in six months. The potential for top/bottom line synergies to double and [stock] buybacks to triple could drive our [stock price target] to $60."

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She also argued that NBCU’s implied value "has almost doubled to $50 billion since 2009."

She called NBC "a bright spot in broadcast ratings with the most ad/retrans upside among its peers." she added: "Ratings have helped NBC garner [ad price] increases of 7 percent-8 percent in this year’s upfront and retransmission [consent] negotiations as they come up for renewal through 2017." She estimates the company will generate $200 million in retrans revenue this year and grow that to $500 million in future years, "in line with CBS at $2 per sub."

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With the U.S. Supreme Court set to announce its decision on Aereo in the coming days, Yong also argued that "Comcast could be a good 'hedge' in times of uncertainty."

The analyst also highlight successful repositioning efforts at NBCU's cable channels. "Rebranding efforts and prudent programming investments are bearing fruit among its 15 cable networks," she said. "Some initiatives to further push penetration include original programming efforts at USA and Syfy and rebranding efforts at Esquire etc. Further, the runway for growth is long at NBC Sports, particularly as it becomes home to the Olympics."

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The movie business is also an ongoing opportunity, according to Yong, particularly when it produces hit franchises that can be leveraged in the company's theme parks business.

"Hits at Universal Films can help grow its high-margin theme park franchise," she wrote. "For example, the company has leveraged the success of Harry Potter and Transformers and is looking to duplicate this with a new Fast and Furious themed ride."

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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