FAIRFIELD, Conn. (
) -- Shares of
got a boost on Thursday after the company struck its deal to share ownership of NBC Universal with
, but a longer-term look at share performance for both parties paints a less bullish picture.
Comcast's stock rose more than 5% on Thursday, boosted by a share buyback and a dividend increase that accompanied the announcement of the $30 billion deal, which will give Comcast a 51% stake in NBCU while General Electric's ownership will drop from 80% to 49%.
General Electric shares were up for most of the session before falling at the close amid a sharp selloff in the broader market. Still, the shares finished the day down just 0.44%, and were ahead of all the major indices.
Thursday's announcement wasn't a surprise as the deal was widely expected and details have changed little since initial reports by
and other news outlets began surfacing after the market closed Sept. 30. It makes sense to take a longer view, then.
From the Sept. 30 close through Thursday's finish, General Electric shares are down 2.6%, while the Dow Jones Industrial Average rose 7.1% during the same period and the iShares Dow Jones US Industrial ETF
, gained 5.5%, (more if you strip out GE, which makes up about 11% of that ETF).
For its part, even with Thursday's jump, Comcast's stock was down 5.7% over the same period, while peers like
saw share price gains.
, boss Rupert Murdoch, who reportedly wanted NBCU, should consider himself lucky. His company's shares are down just 1.3% since the closing bell sounded on Sept. 30. Even
Time Warner Cable
looks weaker relative to Comcast after this deal, has seen its shares outperform those of Comcast since Sept. 30, with its shares off 1.4%.
Certainly the deal has its defenders. Morgan Stanley analyst Scott Davis published a note Thursday stating it was a good move by GE.
"We think GE's divestiture of this non-core asset is an underappreciated positive," he wrote. Davis maintained his "overweight" rating and $20 price target.
My own sense is that General Electric did well to reduce its stake in this business, but that the market has been assigning too much value to NBCU, and continues to do so. I think the extreme complexity of this deal has caused investors smell a rat, which could explain why General Electric's stock has faded somewhat since the sale became public knowledge.
Then again, GE is so big, the stock's performance may be owing to some other factor entirely.
Oppenheimer analyst Tim Horan likes the deal for Comcast, upgrading the stock to "outperform," and arguing the acquisition will add 40 cents per share to free cash flow in 2011. In other words, Horan estimates Comcast will earn 40 cents per share more from its 51% NBCU stake in 2011 than it will pay in that year.
But it's important to remember Comcast will take several years to pay for the assets, and they may not continue to earn as much as they do now. The media marketplace is highly competitive, and there is no guarantee that NBCU cable channels like CNBC, Bravo or MSNBC will maintain their popularity. NBC almost certainly will not.
In short, investors at both General Electric and Comcast have every reason to be skeptical.
Written by Dan Freed in New York