Comcast Corp. (CMCSA), the largest cable MSO of the U.S., is investing a substantial amount in the theme parks of California and Florida. Through this, the company intends to diversify its revenue streams beyond its core telecommunications business (cable TV, high-speed Internet and telephony).
Comcast owns Universal Orlando Resorts since 2011 as part of its acquisition of NBCUniversal. The company is also preparing to introduce a Harry Porter ride at a second theme park in the Universal grounds – Universal Studios Florida. Comcast has also entered into a 50-50 partnership with Lowe's Companies Inc. (LOW) to construct Cabana Bay Beach Resort with 1,800 rooms on the Universal complex. Scheduled to open by the end of this year, the Cabana Bay Beach project will raise the hotel room count at Universal by 75%, bringing the figure to 4,200.
In the recently concluded quarter, the company’s NBCUniversal segment generated $6,464 million in revenues, up 7.5% year over year. Operating cash flow was $1,338 million, reflecting a 14.3% year-over-year rise. In 2013, the company’s revenue from the theme park and resort business stood at $2.2 billion while operating cash flow was $1 billion.
We believe that Comcast’s decision to venture beyond its core telecommunications business will pose significant threat to The Walt Disney Company’s (DIS) tourism business in Orlando and will also help in safeguarding its position against rivals.
Last month, Comcast reached an agreement to acquire the second largest cable MSO (multi-service operator) in the U.S. – Time Warner Cable Inc. (TWC). The deal is likely to be an all-stock one. Comcast will offer approximately $159 per share of Time Warner Cable, which amounts to a total consideration of around $45.2 billion. Each share of Time Warner Cable will be converted into 2.875 shares of Comcast.
Currently, Comcast carries a Zacks Rank #3 (Hold).