Why Comcast Could Be Ready To Cash In On Hulu Stake With Disney

The streaming market has seen explosive growth over the last few years. Hulu is one of the largest streaming companies and had a split ownership between media giants.

Now, Hulu could soon see sole ownership under the Disney umbrella.

What Happened: Hulu currently has split ownership between the Walt Disney Co DIS and Comcast Corporation CMCSA. Comcast could be looking to sell its one third stake in the company anytime and also has a deal in place for 2024 that could require a sale.

“We have an exit opportunity in a couple of years, and that’s going to create – is creating real value for Comcast shareholders, which I don’t know whether it’s reflected in our price of the stock,” Comcast CEO Brian Roberts said at a recent conference.

Comcast controls the flexibility and timing of the sale, according to Roberts: “The opportunity to get a lot of cash from Hulu is coming our way.”

Lightshed analyst Rich Greenfield believes Comcast should sell its stake in Hulu now to limit an unwanted financial overhang, according to a Feb. 1 Fierce Video post. The analyst values Hulu at $45 billion, placing a $15-billion valuation on the stake Comcast owns.

In 2024, Comcast can require Disney to buy its stake in Hulu and Disney can require Comcast to sell the stake at market value. There was a guaranteed minimum total equity value of Hulu placed at $27.5 billion in 2019.

Related Link: Disney Hits 86.8 Million Subs: Key Takeaways Of Investor Presentation

Why It’s Important: Disney owns two thirds of Hulu and Comcast handed over operational control in 2019.

Comcast has since put its focus on its Peacock streaming service. Roberts claims Peacock was the second-fastest-growing brand during COVID-19, trailing only Zoom Video Communications ZM.

Peacock has over 33 million sign-ups for its service, which Roberts noted was 50% more than initially expected.

Peacock is not on every platform yet. Comcast is working to grow out its exclusive content on Peacock as its main growth objective in the media division.

“I look at getting more of our content back from Hulu,” Roberts said.

Hulu ended the third quarter with 36.6 million subscribers.

Benzinga’s Take: The sale of the Hulu stake could be beneficial to both parties. Comcast would gain some much-needed capital that could be used to help boost the original content on the Peacock streaming service. Disney would gain full ownership of Hulu.

A compromise could be reached to see Disney buy the stake and Comcast to gain back some of the content rights that expire in 2024 that could become exclusives on Peacock instead.

A deal announcement could boost Comcast shares if the deal is not priced in as Roberts suggests.

CMCSA Price Action: Shares of Comcast are trading flat on Tuesday at $55.84.

Photo courtesy of Hulu.