Bank Of America: Comcast A 'Model Of Consistency,' Added To US 1 List

Jessica Reif Cohen of Bank of America reiterated a Buy rating on Comcast Corporation CMCSA on Monday with a $70 price target while adding the company to the “BofA Merrill Lynch US 1 list” as a preferred investment idea with near-term upside.

According to Reif Cohen, Comcast is creating a “neat national Cable footprint” through a series of steps. The first step includes the acquisition of Time Warner Cable and a sale of 1.5 million existing Time Warner subscribers to Charter for 7.3 billion.

Following that, the company initiated a swap of 1.5 million Time Warner subscribers for 1.7 million Charter subscribers. Finally, the company initiating a spin-off involving 2.5 million current Comcast subscribers into a new independent, publicly traded company in which Comcast will hold a 67 percent stake.

The analyst notes several reasons why these transactions improve Comcast's position.

First, the transactions further increases its scale and leadership within Pay-TV. Second, it creates a near national footprint which facilitates growth in Business Services and helps advertise sales efforts. Third, Comcast is now enabled to offer a best-in-class product suite, including the X-1 platform to faster growing markets.

Cohen adds that the spin and divestiture will ease the regulatory process while at the same time helps drive higher capital returns.

The analyst expects Comcast will control 29 million subscribers, generate over $88 billion in revenue and $30 billion EBITDA in 2015 while returned nearly $24 billion to shareholders through 2016.