The stock's level - it closed at $42.66 on Monday - suggests that Comcast’s NBCU or Sky segments are “arguably being priced at less than zero” as the company is “too cheap on any reasonable sum-of-the-parts valuation. The suggestion that NBCU and Sky are worth more than zero seems unlikely to draw much argument."
The firm raised Comcast’s price target to $52 a share from $49 as MoffettNathanson sees “little downside risk in the shares from here.” That statement came after the stock dropped 10% from its year-to-date high in Monday’s session.
On Tuesday, the stock has gained 2.7% to $43.81.
“We’ve always lauded the NBCU deal as a brilliant financial transaction but we’ve never quite seen the logic in its pairing with cable,” wrote analyst Craig Moffett. “Nor have we ever seen the logic in having added Sky to the mix (at any valuation, let alone the nosebleed multiple Comcast paid for the privilege). We’ve assigned a hefty conglomerate discount to our sum of the parts valuation to reflect Comcast’s challenging portfolio dynamics and suboptimal capital allocation.”
“Even with a conglomerate discount, Comcast is too cheap on any reasonable sum-of-the-parts valuation. Free cash flow yields, and Comcast’s astonishingly low P/E multiple, render the same conclusion .... Comcast is too cheap,” Moffett said.