Comcast Finally Wins A Bidding War And Buys Sky
After Disney outbid Comcast for 21st Century Fox a couple of months ago, Comcast added to their staple that consist NBCUniversal and nine regional sports networks in the US and outbid Fox for British television company Sky.
According to Comcast CEO Brian Roberts, Sky allows Comcast to increase their customer base and expand internationally. After all, Sky does serve 23 million customers in seven countries: UK, Ireland, Germany, Austria, Italy, Spain, and Switzerland. The Sky acquisition doubles the households Comcast services now.
So why did Comcast sell off on the news? The deal allows Comcast to increase their international revenues from 9% to +25%. But Comcast did pay 38% over their original price. Two analyst had this to say about the buyout.
MoffettNathanson’s Craig Moffett argued that the company shouldn’t be taking a victory lap just yet. “The concept of the ‘winner’s curse’ is central to auction theory,” he wrote. “By the very nature of an auction, the so-called ‘winner’ of an auction is the party willing to pay more for an asset than any other party believes it is worth.”
The downgrade from Oppenheimer’s Horan was less tied to the results of the Sky auction but rather more reflective of the overall industry trends facing Comcast. He cut his rating to perform from outperform “due to a relatively high new pro forma valuation and expected increased competitive pressures from new technologies—fixed/mobile wireless and [over-the-top] video/compression,” according to a note published Monday.
So does the dip in Comcast’s stock price and downgrades present a buying opportunity, lets go to the charts?
On the monthly chart, price dropped from a high of $44 in Jan. to a low of $30 in May. The Smart Money stepped in, just like they did in Oct. of 2016 because buying at that level was buying Comcast at a discount.
On the weekly chart, price has been hugging the up trendline since May. For the buyers that missed out at the $30 level, well, the downgrade offers an opportunity to hop on board. The chart suggests there is more room for price to move higher. Target 1 is $40 and target 2 is $42.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
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Thanks, and thanks for the feedback
6 years without cable here, haven't missed a day of it. Even with hulu, netflix and amazon prime we save $100 a month.
That is awesome stuff, I haven't had that level of discipline yet. I think it's just a matter of me investigating those other options.
I was worried. It was actually completely painless. You can also get an HD antenna at Costco for like $40 if you are dying to watch ABC NBC OR CBS for sports or something. I'm now so used to watching without any commericals, I'd never go back! I also have 2 kids. They've never complained. Hulu Netflix and Youtube, they are plenty busy with those.
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I think the other challenge these guys have and the industry in general is the amount of “cable cutting” going on as many subscribers are preferring on demand streams rather than live canle with adds. I don’t remember the last time I have watch a show without fast forwarding the commercials or just watching them on demand now. That will weigh in the future and overbidding has its costs in the long term given the amount of debt these operators have as well.