Comcast's (CMCSA 1.85%) stock is currently trading around $40 apiece, down from the roughly $60 it was swapping hands for less than two years ago.But with the company outranking rival entertainment stocks on Forbes' most recent Global 2000 list -- which considers market value, sales, profits, and assets -- there certainly are reasons why investors may want to consider Comcast for their portfolio.
Theme park success
In its fiscal 2023 first-quarter earnings call, Comcast revealed its theme parks unit had generated $658 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), representing a 46% gain year over year.
The company cited its partnership with Nintendo and the popularity of Super Nintendo World in California, which opened in February 2023. Comcast said the success of the site has instilled confidence in the earnings potential of several more tie-in facilities, including a Donkey Kong experience that will open in Japan in 2024.
Comcast is also investing in parks inspired by its own bank of intellectual property. These include Illumination's Minions Land, which opens at Universal Studios Florida this summer, and Epic Universe, which is slated for a 2025 launch at Universal Orlando Resort.
Hulu holding
While Comcast's flagship streaming service is Peacock, the company also holds a one-third stake in Hulu, which, according to Statista, generated almost $2.5 billion revenue in 2020. In fact, Hulu is the most successful ad-supported video-on-demand (AVOD) service in North America, with Peacock placing second.
However, Comcast has a standing agreement to sell its Hulu holding to majority stakeholder Walt Disney (DIS -0.04%), but there are some uncertainties over whether the deal can get over the line. Comcast and Walt Disney first came to an arrangement on Hulu in 2019, with the latter agreeing to pay at least $24.7 billion for the outstanding shares in January 2024. At the time, both parties agreed Comcast subsidiary NBCUniversal would continue to make its programming available on Hulu.
But in 2022, NBCUniversal moved many of its Hulu shows over to Peacock. Separately, Walt Disney has announced a plan to start streaming some Hulu content on its flagship Disney+ platform starting later this year.
For investors considering Comcast stock, such moves may raise questions about whether the company's Hulu stake might be worth less when it comes time to sell.
In an interview earlier this year, Walt Disney CEO Bob Iger noted the company is "really studying" the Hulu deal, adding, "Everything is on the table right now."
Comcast CEO Brian Roberts has struck a slightly more optimistic tone, saying that it is "more likely than not" that Disney will exercise its option to acquire the outstanding Hulu shares "in the beginning of next year." Roberts also posited the final price will likely be higher than the previously agreed-upon figure.
The long-term view
Despite Iger's posturing, it seems unlikely that Walt Disney would renege on the Hulu buyout. Stakeholders have priced in Disney's decision to purchase Comcast's stake, and activist stakeholder Nelson Peltz publicly stated earlier this year his position that the House of Mouse "must buy" Hulu or get out of the streaming video industry entirely.
This seemingly firms up Comcast's position and likely underpins Roberts' opinion that the final sticker price could go north of $25 billion. Of course, since returning as CEO in late 2022, Iger has made clear his ambition to save money at Walt Disney, so it remains to be seen if that really will extend to the Hulu sale.
For investors considering Comcast stock, it would be smart to follow what the company is saying about the Hulu stake over the coming quarters, and indeed whether Roberts maintains his belief that the sale will happen in early 2024. Similarly, comments from Iger will also be worth watching.
And when it comes to Comcast's parks operation, market watchers would do well to watch its quarterly reports; if attendance continues to drive unit growth, the company may well have even more success when its upcoming theme parks open.
