Morgan Stanley Dissects AT&T's Sale Of Hulu Stake

AT&T Inc. T has agreed to sell its 9.5-percent ownership stake in streaming video company Hulu back to the company itself for $1.43 billion.

What Happened

The deal values the company at $15 billion, CNBC reported. AT&T said it will use the proceeds from its asset sale to lower its debt load.

Comcast Corporation CMCSA, a 30-percent owner of Hulu, indicated in its 2018 results it's stake contributed a loss of $454 million, which Morgan Stanley's Simon Flannery says implies Hulu as a whole lost $1.5 billion last year. The math translates to a loss of $145.2 million in 2018 for AT&T, or 2 cents per diluted share.

Flannery maintains an Overweight rating on AT&T's stock with an unchanged $37 price target.

Why It's Important

AT&T's sale of its stake in Hulu will help the company delever back to 2.5 times of net leverage by the end of the year, Flannery wrote in a note. The deal could give investors a "marker of confidence" amid concerns within the company's Entertainment Group business.

What's Next

Flannery says the sale of Hulu is also consistent with management's plan to sell off $6-$8 billion worth of its assets. Management continues to explore potential asset sales in its real estate portfolio to help achieve the company's deleveraging objectives.

Walt Disney Co DIS now controls a majority stake in Hulu and will need to work with Comcast on how to account for the AT&T transaction, a Hulu spokeswoman told Bloomberg. Both Disney and Comcast will need to figure out how to apportion AT&T's divested stake.

Related Links:

AT&T Could Find Upside With Earnings Growth, Deleveraging, Raymond James Says In Upgrade

What Wall Street Is Saying About Disney+

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorNewsAsset SalesTop StoriesAnalyst RatingsTechHuluMorgan StanleySimon Flannerystreaming video
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!