Comcast's Breakup is Overdue. it Shouldn't Rush into a New Marriage

Comcast is finally undoing its own bundle. Investors shouldn't hold their breath for a new one.

The cable giant's plan to separate from its media business is largely drawing cheers from Wall Street. Comcast shares rose more than 4% Monday on the news, though that was well off their morning highs. Other media stocks rose as well, with the S&P Media & Entertainment Group gaining nearly 4%. As is typical in media-related transactions, the Comcast breakup sparked speculation that more deals could follow, such as Netflix buying the soon-to-be-independent NBCUniversal.

That's unlikely. For one thing, Comcast expects to take a year to complete the split, and tax rules make another deal challenging for a couple of years after that. And integration with a company like Netflix would pose many of the same challenges that worried Netflix shareholders about a potential Warner Bros. deal.

Investment bankers might be salivating at the prospects, but ending one problematic combination doesn't automatically open the floodgates for more.

The company's current structure has hobbled the stock with a severe discount that has kept the shares' valuation cheaper than 97% of other S&P 500 companies, based on a multiple of projected earnings.

"Comcast now sheds its conglomerate discount and each company can adopt a capital structure appropriate for the times," Craig Moffett of MoffettNathanson wrote in a note to clients on Monday.

Focusing on improving its own business execution would be the best thing for NBCUniversal and the remaining Comcast business for now.

The age of streaming has upended the idea that a producer of media needs its own distribution network. Netflix has become the most powerful force in Hollywood without owning a single TV station or cable system. Investors have voted accordingly. Netflix today trades at nearly four times Comcast's market capitalization, despite Comcast generating more than twice as much annual revenue.

Netflix also showed in its pursuit of Warner earlier this year that it has some interest in owning a traditional Hollywood studio. Going after the owner of Universal Studios would make some sense in that light -- and give Netflix a theme-park business to boot. Peter Supino of Wolfe Research expects Netflix to make a play for NBCUniversal, but added that others might not emerge, as both Apple and Amazon.com declined to pursue Warner when that studio player was up for grabs. "Beyond Netflix, potential bidders for NBCU are sketchy," Supino wrote in a note Monday.

But Netflix faced a severe revolt by its own shareholders over its pursuit of Warner. The same concerns -- price, political pressure, exposure to shrinking TV networks and complications to a streaming-focused business model -- would also be present in a bid for NBCUniversal.

The tax-free design of the current Comcast plan could also be endangered if the company pursued any new deals within two years of completion, and that could prove an interminably long time in a fast-changing media landscape. In a note Monday, UBS analyst John Hodulik said "any M&A would likely take time in order to preserve the tax free nature of the spin."

Comcast for its part sharply denied that future potential deals factored into its plan. "Absolutely not," Chairman Brian Roberts said on a conference call Monday when questioned on that topic.

Moreover, the split-up sells itself in its own right. Over the past five years, Comcast shares have averaged a multiple that was about 50% below that of both Disney and the S&P 500, per FactSet data. And that is even with the Mouse House largely lagging behind the broader market over that time because of the challenges posed by Covid, streaming and its own leadership drama.

Comcast landing a similar multiple to Disney now -- even without deal speculation -- would take its stock up more than 90% from Monday's elevated price. That will take execution and focus.

Some breakups are actually worth the drama. Time on one's own can also be healthy.

Write to Dan Gallagher at dan.gallagher@wsj.com

(END) Dow Jones Newswires

June 30, 2026 05:30 ET (09:30 GMT)

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