BTIG's Greenfield: Comcast Buying DreamWorks Is A 'Mistake'
While $3 billion in cash is relatively meaningless for Comcast, it reflects the company’s lack of financial discipline and should be a cause for investor concern, analyst Richard Greenfield commented.
Why The Deal Is A Mistake
Greenfield highlighted various reasons for the potential deal not being the best decision for Comcast:
- DreamWorks’ shares appear overvalued. The company’s core movie business continues to struggle, while the television business is “meaningfully overearning.” The deal with Netflix, Inc. (NASDAQ: NFLX) would limit Comcast’s ability to leverage DreamWorks’ content into a direct video business.
- Even if DreamWorks is able to exit the Netflix deal early or create additional products for Comcast, the quality of the television content has not been compelling so far.
- The company’s track record in making successful animated movies is underwhelming.
- The performance of DreamWorks’ movies has largely been driven by heavy spending on voice talent and promotions.
- Comcast already owns a superior animation studio and should look to invest in it. “Comcast should inject meaningful capital into Illumination with a far more compelling ROI than overpaying for DWA,” Greenfield wrote.
The $3 billion acquisition price overvalues DreamWorks’ Awesomeness TV.
The analyst commented that buying DreamWorks would not transform NBC Universal into Walt Disney Co (NYSE: DIS).
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