By Andrew Bary

For Comcast shareholders, it's better late than never.

The comp any said Monday that it will separate its NBCUniversal media, entertainment and theme parks business from its cable and broadband operations in a spinoff due to occur in about a year. Comcast shareholders are due to receive shares of NBCUniversal stock, with Comcast retaining a stake of up to 19.9% in the company.

Wall Street has been hoping for such a move for several years given the conglomerate discount on Comcast — disparate businesses under one roof tend to trade at a discount to a sum-of-the-parts valuation — and a lack of clear synergies between the two main Comcast businesses.

Comcast chairman and controlling shareholder Brian Roberts had resisted investor entreaties on a spinoff until Monday.

Investors reacted favorably to the news as Comcast shares are up almost 7% to $24.76 in midday trading Monday.

Comcast's action immediately prompted speculation that more deals could be coming in the consolidating media business. There is the possibility that Netflix, which lost a bidding war with Paramount Skydance for Warner Bros. Discovery, might be interested in all or parts of NBCUniversal.

NBCUniversal operates the Universal Theme parks, the Universal movie studio, the Peacock streaming service and the NBC TV network as well as Sky, the European TV business.

However, the incoming CEO of NBCUniversal, Michael Cavanaugh, said on a conference call earlier Monday that the "separation is not a step toward further strategic transactions," according to a note Monday from Benchmark analyst Matthew Harrigan. There could be benefits, however, from a merger down the road for NBCUniversal on the streaming business since Peacock is undersized relative to such rivals as Netflix.

Harrigan wrote that "the split is especially desirable in assigning fairer immediate value to the studio and parks businesses."

He has a Buy rating and price target of $44 on Comcast stock.

The Comcast split will create an essentially pure-play cable and broadband company. That already has sparked speculation about a combination of Comcast and the No. 2 cable company, Charter Communications. The talk could be helping drive up Charter's very depressed stock Monday, which is up 13% to $151. There also was a report Friday on Bloomberg about a potential wireless partnership between SpaceX's Starlink and Charter, which could be bullish for Charter as it competes versus the wireless giants.

Both Comcast and Charter stocks have been weak over the past year amid growing broadband competition and a once-unthinkable combination of the two cable giants due to antitrust issues is at least a possibility now.

Media mogul John Malone, whose Liberty Broadband is a roughly 25% owner of Charter, has talked about the potential benefits of such a deal.

The advance in Comcast stock Monday, however, needs to be taken in the context of the stock's poor showing this year — and over the past five and 10 years.

Even with the gain, Comcast shares are down 13% this year and off over 25% in the past year. The stock recently hit a new 52-week low of $22, which was the lowest price since 2014.

Considering that Comcast traded at $28 in premarket trading Monday and that analysts had written that an NBC Universal spinoff could add $8-a-share or more to Comcast stock, the gain Monday is underwhelming.

Before Monday's gain, Comcast had been trading for a rock-bottom valuation of about five times projected 2026 Ebitda (earning before interest, taxes, depreciation and amortization).

Considering that media and entertainment valuations are higher than that at closer to 10 times estimated 2026 Ebitda, Comcast ought to be trading higher given that NBCUniversal is set to become an independent company.

"Were NBCU ever freed from Comcast, asset value alone would ensure that it traded well above Comcast's staggeringly low multiple," wrote Wolfe Research analyst Peter Supino recently. Comcast now trades for about seven times projected 2026 earnings — one of the lower P/E ratios in the S&P 500 index — and carries a yield of over 5%.

The backdrop for the Comcast spinoff is tough, however.

Cable and broadband stocks are out of favor due to heightened competition in broadband — their most important business.

There have modest subscriber losses, pricing pressure and rising competitive pressure from so-called fixed wireless services offered by T Mobile U.S., fiber broadband offerings from AT&T and a growing threat from SpaceX's satellite service, which already has about 3 million U.S. subscribers and plans a big push once its powerful new satellite network is in orbit. Wolfe Research analyst Peter Supino recently called Starlink a "comet bearing down on incumbents."

Cable and telecom stocks have been weak this year with Charter Communications down 27% and AT&T down 12% to $21.78, including a 4% drop Monday that has sent the stock to a new 52-week low. The Bloomberg article on potential Starlink/Charter link appears to be depressing telecom stocks Monday.

Media-related stocks have also been under pressure with Disney, Netflix and Paramount Skydance all in the red this year with Netflix and Paramount down 20% or more.

The Comcast spinoff action is favorable for shareholders and if bulls are right, there could be more upside in its stock as investors give the company more credit for the value of the NBCUniversal spinoff.

Then there are the intriguing potential combinations involving Comcast and NBCUniversal in the coming years that could benefit long-suffering Comcast shareholders.

Write to Andrew Bary at [email protected]

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