What Is The 'New Comcast'?
In a report published Friday, Jefferies analyst Mike McCormack maintained a Buy rating on Comcast Corporation (NASDAQ: CMCSA), while raising the price target from $66 to $71, saying that they believe the risks are "overblown."
McCormack said that there is "attractive upside" on a standalone basis as well as "pro forma for the TWC/CHTR/GLCI transaction."
Although the deal closure has been delayed to mid-2015, this is likely "the last reset," the analyst commented, adding, "While the final shape and form of the transaction could change, we anticipate little material impact to valuation and introduce a $71 YE15 pro forma target."
The deal is likely to boost Comcast's ability to compete in "an evolving pay TV and media environment." Video scale offers leverage against rising content costs. Moreover, the significant improvement in NBCU enables Comcast to be well positioned to "help shape the marketplace." Meanwhile, Comcast's leading broadband platform hedges the company against the OTT threat.
In the report Jefferies noted, "Despite management downplaying programming expense savings, we see upside to synergy estimates. Assuming acquired programming expense/sub converges to standalone forecasts over time, we estimate more than $830mn of savings in year 3, or 55% of total guided synergies. Our total year 3 synergies are ~20% above guide and we see incremental opportunities for meaningful revenue synergies, though such benefits are not embedded in our forecasts."
McCormack believes that the "New Comcast" would have the ability to execute similar-sized share repurchases annually even after deal close.
"We believe the market is unfairly discounting Comcast for deal risk and the OTT threat. Based on our estimates, the implied valuation for Comcast Cable remains at a discount versus the peer group, despite a history of consistent execution and industry leading operations," the report added.
Latest Ratings for CMCSA
|Aug 2016||Argus Research||Maintains||Buy|
|Jul 2016||Pacific Crest||Maintains||Overweight|
|May 2016||Goldman Sachs||Maintains||Buy|
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