Goldman Sachs analyst Michael Ng maintained a Buy rating on Comcast Corp (NASDAQ: CMCSA) with a price target of $50.
On November 20, 2024, Comcast announced plans to spin off select cable networks and digital assets into a new publicly traded entity called SpinCo.
The proposed spin-off aims to streamline Comcast's operations and enhance growth by separating its cable networks and complementary digital assets from its broader media and streaming divisions.
SpinCo assets generated approximately $7 billion in trailing twelve-month (TTM) revenue ending September 30, 2024, with an estimated EBITDA between $2 billion and $3 billion, the analyst said.
About 75% of SpinCo's portfolio will focus on news and sports, while the remaining 25% covers general entertainment.
Comcast expects SpinCo to maintain a traditional cable network EBITDA margin of around 30%, driven by reduced Peacock-related losses and sports licensing costs.
Post-spin, Comcast's remaining media assets (RemainCo) will include NBC broadcast, Peacock, regional sports networks, and Sky, generating an estimated $40 billion in annual revenue.
Peacock will likely remain largely unaffected by the spin, as only 2% of its content originates from SpinCo, while 98% will continue to come from RemainCo.
The spin-off positions SpinCo to pursue growth through organic initiatives and mergers or acquisitions, with a dedicated management team and tailored operational focus.
Mark Lazarus, the current chairman of NBCUniversal Media Group, will serve as SpinCo's CEO, and Anand Kini, NBCUniversal's CFO, will become SpinCo's CFO and COO. Comcast expects the transaction to close within a year, pending regulatory approvals.
Ng highlighted the spin-off as a strategic move to refine Comcast's focus on core growth drivers, including residential broadband, wireless services, and streaming.
SpinCo's creation will likely improve CNBC and MSNBC monetization through digital subscription models and potential affiliate fee adjustments.
Ng views the separation as accretive to revenue growth while maintaining Comcast's leverage neutrality.
Risks to the strategy include intensified cord-cutting, rising programming costs, and competitive pressures from streaming platforms.
Despite these challenges, Ng expects the spin-off to unlock shareholder value and position both SpinCo and RemainCo for sustainable growth.
Ng projected fiscal 2024 revenue of $123.42 billion and EPS of $4.24. The analyst estimates fiscal 2025 revenue of $123.43 billion and EPS of $4.43.
Price Action: CMCSA stock is up 1.59% at $43.68 at the last check on Thursday.