Jeffrey Wlodarczak, a Principal and the Entertainment/Interactive Subscription Services Analyst for top Wall Street investment house Pivotal Research Group, this week took a deep dive into the NBCUniversal component of media giant Comcast.
Wlodarczak conducted the review as part of an assessment of NBC’s “mostly” new reporting format. His report card shows that a “likely significantly rebounding NBC” — along with “healthy” cable EBITDA growth, despite the multitude of cord-cutting tales — will fuel Comcast share growth.
As such, he raised his target price on Comcast.
With NBC looking sharp in 2021, Wlodarczak raised his target price to $65 for CMCSA, which has been riding an all-time high on Wall Street and began Friday’s trading at $54.33, up from just under $36 on May 11, 2020.
Much of what’s led Wlodarczak to elevate Comcast’s target price is, arguably, rooted in its Q1 2020 net new subscriber data. It is rosy, with more than 20,000 new customers raising its rolls to more than 420,000. Thus, Pivotal’s Q1 cable EBITDA forecasts are being pushed upward from 6% to 7.5%.
Still, Pivotal raised its 2021 NBC EBITDA target multiple. While Wlodarczak is humble in noting that it is “a still arguably conservative 10X” from its previous 8X target multiple “to better capture what we view as an increasingly logical rise in media EBITDA multiples to account for direct streaming success, with Peacock leading the way.
While an increase in Comcast’s cash tax forecasts were considered, the offset was not substantial enough to limit growth — hence the jump from $63 from $65 for CMCSA.
Fundamentally, as Wlodarczak sees it, Comcast remains a MVPD first company. That’s not necessarily a detriment, despite all of that cord cutting chatter. “Our view is that cable stocks can work from current valuation levels as cable players continue to deliver solid results,” he says.
While Peacock growth is forecast to cool by Pivotal, dips in cable programming costs coupled with full normalization at NBC points to a “potential blowout 2022.”
Furthermore, Wlodarczak concludes, “Against this solid backdrop Comcast is trading at a material discount to S&P 500 EPS multiple (18X 2021 and 14X 2022) which we believe continues to represent an attractive opportunity.”
