Here’s a thought: What if the parent company of NBCUniversal, already an entity with one of the largest omnichannel footprints in the U.S., were to acquire the owner of the Spectrum MVPD, effectively merging it with Xfinity?
Could it happen? While that’s a question for regulators in the second Trump Administration, one Wall Street watchdog wonders if it is time for a tie-up, given the Comcast Corp. fourth quarter results released on Thursday.
Based on the comments from Comcast’s leader, one would never guess such a suggestion would be under consideration.
“We had the best financial performance in our company’s 60-year history with record revenue, EBITDA and EPS along with significant free cash flow,” said Comcast Corp. Chairman/CEO Brian L. Roberts.
Not so fast, says Jeffrey Wlodarczak, CEO and Internet, Media, Sports and Communications Analyst at Pivotal Research Group.
As he sees it, Comcast reported “disappointing results” and equally glum guidance — highlighted by “worse than expected all-important data subscriber” losses of 139,000.
The consensus estimate was for losses of 100,000.
“Without a lot of confidence things are going to get better,” highlighted by likely worse results in the first half of 2025 and a lower than forecast data ARPU of 3.1% compared to Pivotal’s 3.5%, questions abound for “CMCSA” investors, Wlodarczak warns.
In an investor note, he says, “The hope coming out of Q3’s positive result was that Comcast was seeing light at the end of the competitive tunnel in regards in data, partly boosted by their best-in-class converged offering, but that does not seem to be the case.”
This, Wlodarczak believes, is partly because Comcast “has been nowhere near as aggressive on wireless” as industry peer Charter Communications, the parent of Spectrum that Pivotal presently has a “Buy” rating on.
Yes, Pivotal also has a “Buy” rating on Comcast, but Wlodarczak explains this is “driven by the dramatic discount it trades to the replacement value of its assets” and a result of 5.3X 2025 EBITDA and 8.5X Free Cash Flow.
He writes, “The last five years for cable stocks have been awful, driven mostly by competitive data concerns. Comcast management needs to show investors they can restart the data flywheel or the stock is likely stuck in ‘cheap and built to stay that way’ land.”
Given Comcast’s limited growth opportunities, Wlodarczak asks in his investor note an intriguing question — Is it time to go for a merger with Charter?
“This is speculation on our part,” he admits, “but we wonder if now is the time for Comcast and Charter to consider a merger, taking advantage of the heightened competitive environment, lack of footprint overlap, the fact that Comcast is spinning some of its content assets (and might be willing to spin them all to get a deal done) and a likely more benign regulatory climate. Such a move would create sizeable synergies and create more a formidable competitor in wireless.”
When all was said and done, Pivotal reduced the target EBITDA multiple for Comcast’s distribution asset to a “very conservative 6X” and left its 7.5X content multiple unchanged. Additionally, Pivotal raised its conglomerate discount to 15% from 10%. This chopped its year-end 2025 target price for “CMCSA” to $40, from $54.
As of 11:42am Eastern on Friday, Comcast shares were trading at $33.83, up 1.7% from January 30. However, “CMCSA” is down 27.5% from the last day of January 2024.
And, Wlodarczak wasn’t the only Wall Street analyst wary of Comcast’s growth prospective in 2025, as BofA downgraded Comcast stock to Neutral and shifted its year-end 2025 target price downward to $38, from $50.
For Bank of America, the maturation of the U.S. broadband market is a key concern for Comcast to tackle.
“For Comcast, 2025 will be a reset year as the company looks to improve it broadband results by leaning into mobile and converged offerings,” analysts led by longtime Wall Street watcher Jessica Reif Ehrlich said in an investor note.
Breaking down the numbers for the Media segment, total revenue climbed to $7.22 billion, from $6.98 billion, as adjusted EBITDA climbed to $298 million from $108 million. Yet, it was Domestic Distribution revenue growth of 5%, to $2.89 billion, thanks to growth for its OTT platform Peacock, that drove the results. Domestic Advertising was statistically flat, at $2.65 billion.
