By Paul R. La Monica

Charter Communications and rival Cox Communications are getting hitched, leaving shareholders of fellow cable TV company Comcast to wonder what the megadeal means for them.

Comcast stock was flat Friday afternoon, a possible sign that investors remain underwhelmed with the company's prospects.

Comcast, a recent Barron's stock pick , hopes to boost the company's value for investors with a planned spinoff of some of its cable television networks -- including MSNBC, CNBC, USA Network and Golf Channel -- and digital assets such as Fandango and Rotten Tomatoes, into a new company dubbed Versant.

Following the transaction, set to close later this year, Comcast will continue to own other TV networks, most notably NBC and Bravo, as well as the streaming service Peacock, theme parks, the NBCUniversal film and TV studios, and, of course, broadband provider Xfinity.

But investors so far seem underwhelmed by Comcast's plans. The stock is down more than 5% this year while Charter's is up 25%. And Comcast continues to trade at a discount to Charter in a key metric for the cable industry, enterprise value to estimated earnings before interest, taxes, depreciation and amortization. Comcast's EV/Ebitda ratio is 5.9 while Charter trades at 6.8 times.

Walter Piecyk, an analyst with LightShed Partners, told Barron's he doesn't expect this gap to narrow anytime soon.

"Comcast is valued at a discount to Charter and the value of this deal because of its underperformance relative to Charter on maintaining broadband subscribers and growing revenue," Piecyk said in an email.

He added that the Versant spinoff "is too small to highlight that any more than is already evident" and that the only way for Comcast to command a higher valuation is by simply executing better.

What's more, Charter isn't paying through the nose for Cox, a sign that investors aren't viewing the broadband business as an exciting growth opportunity. Craig Moffett, analyst with MoffettNathanson, pointed out in a report that the Cox deal was valued at just 6.4 times Ebitda, which Moffett said was "an absurdly low price."

Still, others argue the Versant spinoff could be a positive catalyst. Matthew Harrigan, an analyst with The Benchmark Company, said in an interview with Barron's that some of Comcast's non-network assets do deserve a higher multiple.

Harrigan thinks Comcast stock could crawl forward as long as there is progress on the Versant transaction. Further signs the U.S. economy may avoid a recession or severe economic slowdown would also help.

The spinoff could also make it easier for Comcast to make deals of its own in the rapidly consolidating broadband sector. The company wasn't immediately available for comment.

But Jonathan Chaplin, an analyst with New Street Research, said in a report Friday the Charter-Cox merger may open the door for Comcast to scoop up Altice USA, the owner of the Optimum broadband network.

Chaplin said the "odds are decent that this deal is attempted" but he added that Comcast "is likely to wait until there is greater certainty around how the [Trump] administration will react to deals generally." He added that the Versant spinoff would likely happen first before Comcast pursued any major acquisitions.

It doesn't appear Wall Street thinks a Comcast-Altice deal is likely. Shares of Altice plunged more than 15% Friday. Chaplin wrote "investors had hoped for a transaction with Charter."

So Comcast is likely to remain focused on getting the Versant spinoff completed so it can become a purer play broadband story before pursuing any other major growth initiatives.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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May 16, 2025 14:41 ET (18:41 GMT)

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