Comcast (CMCSA) announced Wednesday that it will spin off select cable television networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY and the Golf Channel. The spinoff includes some of CMCSA's digital assets, including Fandango, Rotten Tomatoes, GolfNow and SportsEngine. It will create a new publicly traded company called SpinCo.
"When you look at our assets, talented management team and balance sheet strength, we are able to set these businesses up for future growth," said Comcast CEO Brian Roberts in a statement. "With significant financial resources from day one, SpinCo will be ideally positioned for success and highly attractive to investors, content creators, distributors and potential partners."
SpinCo will be a pure-play news, sports and entertainment business reaching approximately 70 million households and will be led by Mark Lazarus, the current chairman of NBCUniversal Media Group, as CEO.
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"As a standalone company with these outstanding assets, we will be better positioned to serve our audiences and drive shareholder returns in this incredibly dynamic media environment across news, sports and entertainment," Lazarus said. "We see a real opportunity to invest and build additional scale and I'm excited about the growth opportunities this transition will unlock."
In the trailing 12 months, SpinCo generated approximately $7 billion in revenue, Comcast said, adding that the company will have the same dual-class share structure as at CMCSA.
Comcast said it expects the spinoff to be completed in approximately one year, and is subject to approval by its board of directors, regulatory approvals and other closing conditions.
Is Comcast stock a buy, sell or hold?
Comcast is up nearly 16% since mid-June, but shares are flat on a year-to-date basis. Still, Wall Street is bullish on the communication services stock.
According to S&P Global Market Intelligence, the average analyst target price for CMCSA stock is $48.17, representing implied upside of roughly 13% to current levels. Additionally, the consensus recommendation is Buy.
But not everyone is all-in on the large-cap stock. Financial services firm Bernstein has a Market Perform rating (equivalent to a Hold) and $48 price target on CMCSA.
"We maintain our Market-Perform rating for Comcast with a price target of $48," wrote Bernstein analyst Laurent Yoon in a note this morning.
The spinoff news creates upside to this price target and the share price, but "the magnitude of the upside, or even a downside, depends on the structure as well as potential external parties involved. For now, it's too early to tell," the analyst adds.
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