Comcast’s NBCUniversal Spin-Off Increases Potential For Marger With This Telecom Giant

Comcast Corp (NASDAQ: CMCSA ) announced plans to split into two publicly traded companies through a spin-off of NBCUniversal, including Sky. • What should traders watch with CMCSA? The spin-off would leave Comcast as a more focused connectivity, broadband, wireless, business services and technology platform, according to BofA Securities.

The Comcast Analyst: Analyst Jessica Reif Ehrlich maintained a Buy rating and price target of $37.

The Comcast Thesis: The transaction is expected to be completed in around 12 months, with Mike Cavanaugh leading NBCUniversal and Michael Angelakis returning to lead Comcast, Ehrlich said in the note.

Check out other analyst stock ratings. "We view the announcement as a major positive," she wrote, while adding that the split from NBCU could create "greater strategic optionality," including a potential merger with Charter Communications Inc (NASDAQ: CHTR ).

Among the biggest concerns facing Comcast’s stock had been that the company owned valuable businesses, "but investors were unwilling to pay for the full portfolio inside one structure," the analyst stated.

The NBCU split addressed this, she noted. "Management framed the transaction around industry leadership, sharper capital allocation, investment-grade balance sheets and enhanced strategic focus," Ehrlich wrote.

The remaining Comcast would be "a cleaner, cash-generative connectivity company" with among the largest converged networks in the US, she further stated.

Next steps include: Filing a Form 10 Financing arrangements Obtaining tax opinions Obtaining regulatory approvals Finalizing board approval Providing a detailed capital structure Framing dividend policies before closing Comcast will retain a stake of as much as a 19.9% in NBCUniversal for up to one year after the spin-off is executed, the analyst said.

The separation "clearly increases optionality over time," Ehrlich stated.

While a combination of Comcast and Charter Communications would face regulatory scrutiny, after the NBCU separation, the company is a "more credible long-term consolidator or acquisition target," she noted.

The NBCU/Sky entity will have valuable assets but may need further consolidation to maximize its competitive position and equity value, Ehrlich believes.

CMCSA Price Action: Shares of Comcast had risen by 0.47% to $24.31 at the time of publication on Tuesday.

Read Also: Comcast Stock Soars On Split News, Does Disney Need To Make A Similar Move? Photo by Daniel J.

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