Comcast Stock Rises Pre-Market On Cable Spin-Off Report: Analysts Skeptical, Retail Hesitates

Shares of Comcast Corp. ($CMCSA) rose as much as 2.5% before markets opened on Wednesday after reports that the company is expected to announce a plan to spin off most of its cable TV networks.

According to the Wall Street Journal, Comcast is planning to decouple its entertainment and news channels including MSNBC, CNBC, USA, Oxygen, E!, Syfy and Golf Channel.

The move highlights Comcast's focus on its core NBCUniversal assets, including broadcast television, sports rights, film studios, and theme parks, which the company sees as having stronger growth potential. 

Comcast is reportedly relying on its financial position to manage the loss of profits from cable networks, which have been in decline due to cord-cutting trends.

However, Barclays has expressed skepticism about Comcast’s rumored plan to spin off its cable network business, suggesting it may not make financial sense on its own, but has maintained its ‘Equal Weight’ rating on Comcast with a $42 price target.

The brokerage noted that the standalone business would likely struggle due to its smaller scale in revenue, EBITDA, and cash flow, which could exacerbate structural challenges. 

It believes the move could be part of a broader strategic initiative aimed at sidestepping regulatory challenges to pave the way for larger deals in the cable sector. 

The report comes after Comcast President Mike Cavanagh said the company was exploring the creation of a separate company for its cable networks and would consider partnerships in streaming during the company’s third-quarter earnings call late last month. 

“We are now exploring whether creating a new, well-capitalized company owned by our shareholders and comprised of our strong portfolio of cable networks would position them to take advantage of opportunities in the changing media landscape and create value for our shareholders,” he said. 

Comcast Corp. Sentiment and Message Volume on Nov 19 as of 7:00 a.m. ET | Source: Stocktwits

Retail sentiment on Stocktwits remained in the ‘neutral’ (51/100) zone after the development but there was an uptick in chatter to ‘extremely high’ from ‘high’ a day ago.

When Comcast acquired NBCUniversal in 2011, its cable networks, including E! and Oxygen, were seen as valuable assets in a growing cable market. However, years of declining subscriptions and viewership have significantly impacted the sector. 

The spin-off, structured as a tax-free distribution to Comcast shareholders, is expected to take about a year to complete, according to the Journal.

Mark Lazarus, currently chairman of NBCUniversal’s media group, will reportedly be the CEO of the new venture. Anand Kini, NBCUniversal’s CFO, will take on the role of CFO and operating chief for the spin-off. 

Comcast President Mike Cavanagh also announced other leadership changes to prepare for the transition.

While the market has climbed higher, Comcast shares have slipped 1% so far this year.