Comcast (CMCSA) opened Monday’s trading up nearly 17% on news that the company would spin off its NBCUniversal and Sky media and entertainment businesses, keeping the cable, wireless, and broadband businesses, along with up to a 19.9% stake in the spinoff.
That’s welcome news to long-suffering Comcast shareholders. The company has faced a conglomerate discount for years because of the perceived lack of synergy between the two businesses. Certainly, the nasty divorce between Time Warner and AT&T (T) is but one example of disparate tie-ups gone wrong.
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As a result of investor skepticism about Comcast’s strategy, CMCSA shares haven’t traded this low since May 2014. Shares traded $8 higher in October 2018 after Comcast completed its $40 billion all-cash acquisition of Sky. They peaked at $61.80 in September 2021. They’ve been downhill ever since.
Whether you are skeptical or not about the company’s plans to split into two businesses, I don’t think there’s any question that value investors should be intrigued by Comcast’s shares at current prices.
Yesterday’s bullish price surprise might be a dead cat bounce, or it might be the beginning of a retracement of its share price to its all-time high in the $60s.
Here’s a look at both sides of the argument.
Walt Disney Provides a Good Example
As Walt Disney (DIS) can attest, investors often don’t give enough credit to the parks segment of a large media and entertainment business.
The House that Walt Built is currently valued at $215.22 billion, about 2.3 times revenue and 15.1 times its trailing 12-month operating income. Disney closed at $98.63, about 24% lower than the analysts’ median target price of $130, according to S&P Global Market Intelligence.
In fiscal 2025 (September year-end), the company’s retail and merchandise licensing businesses, which operate within the Experiences segment, accounted for 12% of the Experiences segment’s $36.16 billion in annual revenue….
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