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Comcast Invests in Digital Media Industry, Eyes Snap Inc

Zacks Equity Research

Leading cable MSO (multi service operator) and media and entertainment firm Comcast Corp. CMCSA is strengthening its foothold in the digital media industry through every year investments. In Aug 2015, Comcast’s NBC Universal segment invested $200 million in online media company Vox Media. In Nov 2016, NBC Universal invested $200 million in online social news site BuzzFeed.

Based on its expansion, Comcast recently came up an IPO (initial public offering) investment of $500 million in the L.A. based multinational technology and social media company, Snap Inc. by NBC Universal. Overall, the cable MSO sums up its investment in the lucrative digital media business to over $1.5 billion in the last 18 months.

However, this is not the first time that Comcast is engaging its business with Snap. NBC Universal had produced episodic content like The Voice, Saturday Night Live, and E! News’ The Rundown that were aired on Snapchat. Its Rio Olympics coverage through BuzzFeed generated over two billion views. On the back of this success, the cable MSO seems to be planning an extended partnership with Snapchat and BuzzFeed for the 2018 Winter Games in South Korea.

Digital media brands are gradually gaining significant market traction especially among the young generation. With massive growth in demand for smartphones and tablets, millennials are increasingly watching videos online and discontinuing costly cable TV connections.

As the media sector has become intensely competitive, the large incumbent media companies are investing in small-sized media and distribution channels for the next-generation digital TV platform for their future growth. Comcast will utilize its partnership with Snap, BuzzFeed and Vox Media in its Watchable digital video platform.

Notably, Comcast’s NBC Universal segment is witnessing significant improvement. In the recently reported fourth-quarter 2016 earnings results, total revenue of this unit cameat $8,451 million, up 13% year over year. Operating cash flow was $1,770 million, exhibiting a rise of a 14%.

Comcast is also focusing on its theme park business for growth, investing billions of dollars. After the acquisition of the NBC Universal division of General Electric Co. GE, Comcast gained the ownership of Universal theme parks. Theme Parks revenues also increased 32.1% year over year to $1,344 million.

Similar Digital Media Business

The Walt Disney Co. DIS invested $400 million in Vice Media and Discovery Communications Inc. DISCA and $100 million in Group Nine Media. In Jun 2015, telecom giant Verizon Communications Inc. VZ ventured into online content business with the acquisition of AOL Inc., which owns websites like The Huffington Post, Tech Crunch, Engadget, Moviefone and MapQuest.

Hence, Comcast is also looking forward to the lucrative segments of digital advertising and content creation as well as distribution. We believe that investing in Snap may turn out to be a major breakthrough for the company’s business. As we move on to the price performance of the company over the past six months, we see that shares of Comcast grew 12.28% compared withthe Zacks-categorized Cable Television industry’s gain of 9.91%.

Comcast currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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