Morgan Stanley Continues To See Upside In Comcast Shares After Its First Quarter With NBCU

Morgan Stanley sees absolute upside in Comcast Corporation CMCSA shares in line with the broader cable/satellite group. It prefers stocks with either higher organic growth or greater financial leverage in this low-interest rate environment such as DirecTV DTV. Previously, Morgan Stanley had included one month of RSN financials in its 1Q11 core cable operating results, which it is now reclassifying into Comcast's content businesses, consistent with how it expects Comcast to report. For NBCU, it expects GAAP financials to include 2 months of financials in 1Q, though Morgan Stanley provides a pro-forma “full” NBCU quarter in its model. Morgan Stanley applies an 8x EV / fwd EBITDA multiple to NBCU's 50% stake in the UCDP assets, leading us to upwardly revise our estimate for the value of NBCU's unconsolidated assets by ~$700M. Post GE's minority interest in the NBCU JV, this positively impacts Morgan Stanley's sum of the parts valuation of Comcast by <$0.15 per share. Morgan Stanley has a $27 PT and Equal-weight rating on CMCSA CMCSA closed Tuesday at $24.31