After an intense bidding war with Walt Disney Co. (ticker: DIS) over Twenty-First Century Fox ( FOXA), Comcast Corp. ( CMCSA) threw in the towel on Thursday and said it is officially out of the Fox sweepstakes. CMCSA stock gained 3 percent in Thursday’s session, and analysts are already stepping up to say Comcast is better off without Fox.
By dropping its Fox bid, Comcast will be saving at least $65 billion in cash and will be focusing on its leading $34 billion bid for British media giant Sky. Strangely enough, Fox, which owns a 39 percent stake in Sky, is now Comcast’s primary competition for Sky. Fox recently announced a $32.5 billion bid for Sky, prompting Comcast to retaliate with its own $34 billion offer.
While Fox’s assets would have created opportunities for Comcast, the uncertainty surrounding the deal and its steep price tag have weighed on CMCSA stock in recent weeks. Raymond James analyst Frank Louthan IV says Comcast dropping its Fox bid is a good move for investors.
[See: 8 of the Best Stocks to Buy for the Rest of 2018.]
“Comcast is the best positioned large-cap cable/telco name with predictable growth, cash returns to shareholders, low leverage, recurring revenue, and [free cash flow] growth,” Louthan says.
He said the company demonstrated discipline in not overpaying for Fox.
“We believe Comcast is the best operator in the space with an attractive set of assets, and that this will be better reflected in the share price over the next 12 months,” Louthan says.
Morningstar analyst Neil Macker says Comcast landing Sky could soon be a done deal.
“While Comcast can now increase its bid for Sky, the flexibility may not be necessary, as Disney recently filed papers implying that it might not support an improved bid by Fox,” Macker said.
Losing Fox may be a disappointment to Comcast management, but Macker says Sky would be a major feather in Comcast’s hat, particularly when it comes to the international market.
“By total subscribers, the combined firm would be the second-largest pay-TV operator in the U.S and largest in the U.K. while also being the largest broadband provider in the U.S. and second largest in the U.K.,” Macker says.
He says Sky and Comcast subsidiary NBCUniversal could have a golden opportunity to cross-promote and cross-sell content.
[See: 7 Small-Cap ETFs to Help You Win a Trade War.]
Raymond James has an “outperform” rating and $40 price target for Comcast. Morningstar has an “undervalued” rating and $42 fair value estimate for CMCSA stock.
More from U.S. News
9 Tips to Conquer FIRE: Financial Independence, Retire Early
8 Investing Do’s and Don’ts During Market Volatility
The Top 10 Investment Portfolio for Millennials
Comcast Move Praised for Investors originally appeared on usnews.com
