Comcast's NBCUniversal to Grow Biz with Diagon Alley - Analyst Blog

Comcast Corporation CMCSA owned NBCUniversal's Orlando Theme Park business is expected to witness increased footfall with the inauguration of the new Diagon Alley on Jul 8, 2014.

Universal's new Diagon Alley resembles the shopping area of the same name in J.K. Rowling's popular series – Harry Potter. The attraction will feature a fire-breathing dragon on top of Gringotts Bank at the end of the alley. The main appeal of the alley lies in the roller coaster ride named "Harry Potter and the Escape from Gringotts," again an inspiration from the movie. The place will also boast several restaurants and shops where one can eat and buy Harry Potter movie souvenirs.

The inclusion of Diagon Alley in Universal Orlando's Harry Potter world – which replicates Hogsmeade and was opened in 2010 – is a positive for the company and is expected to drive revenues going forward. Moreover, the company plans to add the Diagon Alley attraction to its Hollywood Theme Park in 2016 which will further boost the company's business, in our view.

As Hogsmeade and Diagon alleys have been built in separate Universal parks, customers need to buy two passes for a total value of $136 (exclusive of taxes). A train named Hogwarts Express – similar to the one mentioned in the Harry Potter series – will take the guests to both the locations.

In the recently concluded first quarter of 2014, Theme Parks revenues totaled $487 million, up 5.4% year over year. NBCUniversal has decided to add new attractions to its theme parks going ahead. In the reported quarter, the operating expenses for Theme Parks grew 9.5% year over year.

Comcast has also entered into a 50-50 partnership with Lowe's Companies Inc. LOW to construct Cabana Bay Beach Resort with 1,800 rooms on the Universal complex. Scheduled to open by the end of this year, the Cabana Bay Beach project will raise the hotel room count at Universal by 75%, bringing the figure to 4,200.

On the down side, we believe that the company should have opened the Diagon Alley in the month of May and June when most schools and colleges closed for the summer vacation. Theme Park businesses are cyclic in nature and therefore, the timing of the launch is very important to draw huge crowds.

Currently, Comcast carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked stocks in the same industry, which warrant a look, include Shaw Communications Inc. SJR and Cablevision Systems Corporation CVC. Both the stocks have a Zacks Rank #2 (Buy).