It was not long ago when we first heard the notion that, one thing that was working against communications giant Comcast (CMCSA) was its sheer complexity. That idea is not so crazy, especially once a Barron’s report got into the meat of it. But how complex is Comcast really? It turns out, it is extraordinarily complex. And a closer look at just how complex might make you wonder if it is time for Comcast to divest more than just its linear television stations.
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What’s In a Ticker Symbol?
We noted this one earlier, briefly, but Comcast’s ticker symbol connotes a lot of complexity under the hood. The ticker symbol is CMCSA, and that A stands for “class A shares.” This in turn means that there is, likely, somewhere a class B share, but it is not publicly traded. The Barron’s report noted that, normally, an untraded—or as it called it, “off-limits”—class of shares is done as a means to “maintain voting control that outweighs its economic stake.”
Noting that the current CEO, Brian Roberts, is the son of the original founder certainly does not hurt matters on that front. Most like to suggest that off-limits classes like that should be in place as a means to “insulate” some assets and even some people from “…the crass ups and downs of the stock market.” Still, it adds a layer of complexity to things that really is not all that welcome.
How much of the company is, essentially, in private hands? Comcast’s own investor FAQ answers that question: “The Class B common stock constitutes an undilutable 33 1/3% of the voting power of the total voting power of all classes of the Company’s common stock.”
Diversification Excelsior
Meanwhile, beyond the ticker, there is the matter of Comcast’s operations. Comcast has, of course, cable television service. And not long after that, it added internet access. Reasonable enough; some of these run on the same system, and once you dig one cable, you might as well lay down two, and provide twice the service.
But then Comcast started expanding. Its acquisition of Universal not only gave it the backbone to bring entertainment into homes—be it straight television or internet-based—but also gave it the content too. It got all the cable channels, all the broadcast channels like NBC, and plenty of movie content from Universal as well. And the movie content is going great guns right now. Third quarter revenue hit $2.8 billion, up 12%, thanks to a range of titles from Despicable Me 4 to Wicked.
Comcast also got a different bonus with its acquisition: Universal Studios Florida. So now, the company that started out as a cable provider is now a cable provider, an Internet service provider (ISP), a television producer, a movie producer and a theme park operator on top of it. This just adds to the complexity.
Everything Everywhere All At Once
As bad as this is, we also have to bear in mind that Comcast is an international operator. Its shows and movies go out all over the world. Further, Comcast owns Sky, which at least gives it an outright presence as a television operator in the United Kingdom. And Comcast, via Xfinity Mobile, has some kind of service available in over 200 countries, notes Xfinity itself.
So is it too complex for its own good? Well, that is, ultimately, a matter of opinion. Certainly diversification is a good thing. It insulates against market downturns by having more than one revenue stream available. By like token, a good thing can be taken too far.
Too much diversification splits focus and prevents the fullest extent of resources to be brought to bear on any one project. But with Comcast already looking to divest its live channels, as we have known since back before Christmas, Comcast might be making a move to pare down some of its ventures and limit itself to the most profitable instead.
Is Comcast Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CMCSA stock based on 14 Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 13.46% loss in its share price over the past year, the average CMCSA price target of $48.95 per share implies 31.91% upside potential.
