Wall Street Reflects on Comcast-NBCUniversal Ahead of Deal’s First Anniversary

3:28 PM PST 01/27/2012 by Georg Szalai
Ben Gabbe/Getty Images

Amid a lack of a major slip-up in executing the combination, the cable giant’s stock is higher, and some analysts expect further upside.


NEW YORK – A year ago this weekend, Comcast closed its acquisition of a 51 percent stake in entertainment company NBCUniversal, and the cable giant’s stock has been on the upswing.

Wall Street observers give the deal and integration of the two firms mostly positive reviews, highlighting that Philadelphia-based Comcast has largely avoided major operational slip-ups, even though the NBC broadcast network has not shown improvement.


“I feel that the deal has been an A- hit, with the entire value largely supported by the very healthy cable networks and [theme] parks business even with higher programming outlays at USA etc,” said Wunderlich Securities analyst Matthew Harrigan.

Industry observers noted that while executives have been replaced under the leadership of NBCUni CEO Steve Burke, there doesn’t seem to have been high-profile culture clashes like in the case of media mega-mergers of the past. “The biggest accomplishment is improving morale and ensuring management continuity, while bringing in top tier talent, such as [NBC entertainment chief] Robert Greenblatt,” said Harrigan.

“The biggest accomplishment in year one is not all that obvious, but I would say it is integration,” echoed Miller Tabak analyst David Joyce. “Steve Burke is getting the Comcast side and the NBCU side to work together, where appropriate, to create synergies.”

Case in point was the promotion of new NBC sing show The Voice across Comcast and NBCUniversal assets.

Comcast shares finished the week at $26.33, giving the company a market value of $71.2 billion, according to Bloomberg. The stock has over the past year traded between $19.19 and $27.16. Since the deal close, the stock has risen more than 15 percent. The stock’s total one-year returns amounts to 15.1 percent.

The theme parks division has provided positive financial news for Street watchers. “The parks have continued to be an upside surprise, and they had the opportunity to buy the rest [of a Florida park] in - and they plan to invest more in attractions for more growth,” Joyce said in lauding management’s decisions.  

The biggest challenge, meanwhile, remains the NBC network. “The biggest upside surprise remains the parks, the dismal element is Peacock ratings,” Harrigan said. “Comcast was realistic going in, but there certainly have been no pleasant surprises with the ratings shortfalls.”  

Added Joyce: “They have been investing in new programming for the NBC network, which has not started to improve yet, but that asset's turnaround was meant to be a marathon.”

The timing of a potential NBC ratings improvement is difficult to call, say industry folks. “Unfortunately, the good momentum at CBS and Fox probably makes Greenblatt's job more difficult although one or more hits can reverse that quickly,” Harrigan said. Comcast executives throughout the first post-deal year have repeatedly said that they see NBC as a multi-year project.

Comcast chairman and CEO Brian Roberts along with Burke is expected to share his latest thoughts on the integration of the two companies when the cable giant reports fourth-quarter and full-year earnings on Feb. 15.

Comcast CFO Michael Angelakis earlier this month said that NBCUni's film studio profitability must improve, that Spanish-language broadcaster Telemundo is "a diamond in the rough" and that the entertainment company's management team remains "pretty darn focused" on turning around the NBC broadcast network.


How do analysts feel about the NBCUniversal acquisition today?  “It takes time, but the stock has been rebounding nicely - with a lot of upside, we still believe,” said Joyce, who has a $30 target price on the stock and a $35 longer-term target). “I am still as bullish as I was a year ago.”

Harrigan also remains upbeat. “I continue to think this will be a long-term home run for Comcast with stock price potential into the mid-30s this year,” he said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

 

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