Morningstar

Comcast: Separating the Broadband and Media Businesses Should Create New Opportunities

We applaud this move, as we’ve long held that combining the cable broadband and media businesses provides minimal operational benefits.

The Comcast logo as seen on the Comcast Center Campus in Philadelphia.
Jeff Fusco via AP
Securities in This Article
Comcast Corp Class A
(CMCSA)

Key Morningstar Metrics for Comcast

  • Fair Value Estimate
    : $41.00
  • Morningstar Rating
    : ★★★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Medium

Comcast CMCSA will separate its cable broadband and media businesses through a tax-free spinoff of NBCUniversal and Sky. The company expects to close the transaction in mid-2027.

Why it matters: We applaud this move, as we’ve long held that combining the cable broadband and media businesses provides minimal operational benefits, and that any financial benefits could be realized more easily through partnerships or standard commercial agreements.

  • The decision marks a dramatic departure for Comcast management, which has long championed the benefits of its combined operations and recently noted the positive impact of the media segment’s February broadcasts of the Olympics and Super Bowl on the broadband business.
  • Splitting these businesses should allow each to pursue attractive mergers, asset sales, or partnerships that are more difficult to contemplate as a combined firm. Brian Roberts will, however, remain the final arbiter of both firms’ decisions via supervoting shares.

The bottom line: We maintain our $41 per share fair value estimate, based on our cash flow forecast for each business. We don’t believe the separation will meaningfully alter the standalone trajectory of either firm, but we do believe Comcast will have increased opportunities to realize the value of these underappreciated assets.

Big picture: Comcast admitted that growing competition in the telecom and media industries has increased the need for strategic flexibility, but Roberts denied that this split is intended to facilitate additional transactions. That claim doesn’t make sense to us.

  • A merger between Comcast and Charter makes sense, as the firms cooperate in several areas, including wireless, and would gain scale benefits. The media business could become a target for Netflix, which lost Warner to Paramount earlier this year.
  • With former CFO Michael Angelakis returning to lead the broadband business, we are unclear what will happen with Comcast’s nearly $5 billion stake in his investment company.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center