By Investing.com – BofA analyst on Thursday said Comcast Corp (NASDAQ:CMCSA) decision to spin off its cable networks, excluding Bravo, and some digital assets into a separate company, was a “positive strategic step”.
Analyst believes the move will allow Comcast to focus on higher-growth segments by separating slower-growing cable assets. The newly formed company is expected to acquire additional cable networks to achieve scale and drive growth.
The spin-off is also expected to return capital to shareholders through dividends or share repurchases.
The new company is expected to own a portfolio of popular cable networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY, and Golf Channel, along with digital assets like Fandango and Rotten Tomatoes. There is just 2% of entertainment content for Peacock being spun out.
Comcast will retain ownership of its NBC broadcast network, Bravo, Telemundo, Peacock, and its film and TV studios.
“While we believe that the significant exposure to news and sports content will help support programming carriage rates, the lack of NBC content to bundle into programming contracts could prove to make rate negotiations more challenging until SpinCo is able to increase scale,” analyst said.
On the other hand, the spin-off could potentially reduce regulatory hurdles for Comcast, enabling it to pursue future cable mergers.
“Supported by its strong balance sheet and healthy FCF generation, Comcast should drive solid capital returns and at roughly 6 times is attractively valued, in our view,” analyst said.
The analyst maintains “buy” rating and have a price target of $50 for Comcast.
