After three weeks of the opening of its 2012-13 broadcasting
season, NBC is up 15% in ratings compared to the same period last
year while the other broadcasting networks are down by 12% to 24%.
While this is good for NBC on a stand-alone basis, how does it fit
in the context of Comcast's (
) overall value? Given that NBCUniversal contributes just 15% to
Comcast's value, and within that, broadcasting business accounts
for only 20% of the profits, the upside potential is very
This is a surprising but pleasant development for NBC which has
been re-working its programming to revive the network. NBC
Broadcasting Network was a weak spot in the media arsenal of
NBCUniversal when Comcast acquired it last year. Due to relatively
weaker programming, the network was consistently falling behind its
competitors such as CBS (
), Fox and ABC. However, in the new season, NBC has started off
with a significant gain in ratings and is currently holding the top
spot among the big four broadcasting networks in the U.S.
See our complete analysis for Comcast
According to Comcast's Q2 2012 results while cable networks'
EBITDA margins stood at around 35%, the broadcasting business had
margins of less than 13%. Additionally, revenues from cable
networks were roughly 50% more than broadcasting revenues. Overall,
broadcasting contributed just 20% to NBCUniversal's total EBITDA.
Therefore, the sensitivity of the broadcasting business to
Comcast's value is low.
NBCUniversal's broadcasting revenues stood at close to $6
billion in 2011, and we forecast this figure to increase to almost
$9 billion by the end of our forecast period. Even if we were to
assume that these revenues will double to $12 billion during the
same time frame, the upside to our price estimate will be minimal
(close to 2%).
NBC racing ahead is big news if we look at the broadcasting
network alone. However, we must not lose sight of the big picture
and, that is, the benefit to Comcast is likely to remain very
small. The key drivers for Comcast's stock are still its broadband
and pay-TV businesses.
Our price estimate for Comcast stands at $37
, implying a premium of about 5% to the market price.
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