Why A Comcast Buyout Of Roku Is Unlikely

A report this week from the Wall Street Journal suggested media giant Comcast Corporation CMCSA could be looking to make an aggressive move into the streaming space.

On Thursday, Bank of America analyst Jessica Reif Ehrlich said Comcast has a very strong set of assets and is well-positioned to attack the streaming market organically.

“As such, we do not believe CMCSA is pressured to make an imminent acquisition, but rather it will approach any action diligently and strategically, with a focus on attractive value creation - in line with the company’s historically disciplined approach to M&A,” Ehrlich wrote in a note.

Potential Buyout Targets: Specifically, she said a potential buyout of Roku Inc ROKU doesn’t make sense given Roku’s hardware would add nothing to Comcast’s own Flex content and intellectual property.

In addition, Ehrlich said Comcast recently reimplemented its buyback program, and she's projecting $3 billion in buybacks in 2021. She said the return of buybacks is an indication a major buyout is likely not imminent.

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Looking into the distant future, Ehrlich said Comcast may eventually look to supplement its content library and production capabilities via M&A deals with Discovery Communications DISCA or ViacomCBS VIAC, but any deal would need to come at an attractive valuation.

For now, Ehrlich said Comcast’s cable business is growing at a healthy rate and the NBC Universal/Peacock combination makes Comcast the powerhouse in traditional media advertising in 2021.

Bank of America has a Buy rating and $69 price target for Comcast.

Benzinga’s Take: Traditional cable TV may be dying a slow death, but Comcast is certainly not going down with the ship. Bank of America is projecting double-digit EPS growth and positive revenue growth for Comcast through at least 2023.

Comcast shares fell Wednesday afternoon following the report. The stock trades around $55.83.

Photo: Mike Mozart via Wikimedia