Comcast rises as Wells Fargo upgrades, citing 'less negative' view on cable
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Comcast (NASDAQ:CMCSA) shares rose nearly 1% in premarket trading on Monday as Wells Fargo upgraded the cable and media giant, citing a "less negative" view on its cable business even as the outlook for its NBCUniversal division continues to worsen.
Analyst Steven Cahall upgraded Comcast (CMCSA) to equal-weight from underweight, noting that even though the company has experienced intense competition in its broadband business from fixed wireless access and fiber, it's likely that the headwinds will ease next year. 
"While broadband competition is increasing, it's not creating all the bad trends we had feared," Cahall wrote in a note to clients, adding that average revenue per user is "holding up better" and potentially even benefiting from cord cutting, low churn and the fact that fiber prices are starting to approach $70 per month.
Cahall also noted that the picture on Comcast's (CMCSA) capital spending is "far more clear," with roughly $12B in total needs for scalable investment in infrastructure between 2023 and 2025, a timeline faster than he expected, and less spending then expected.
"The result is a less negative outlook for [free cash flow], though with our forecast of $12.65B in 2023 we're still 11% below [Wall Street]," Cahall added. "Better clarity on [free cash flow] make us more constructive."
As for NBCUniversal, Cahall "aggressively" cut estimates, citing a 7% decline in annual subscribers, as well as weakness in scatter advertising pricing and continued "peak losses" for its subscription service, Peacock. 
"We reset our NBCU valuation ex-Theme Parks to ~7x EV/ EBITDA, which is consistent with our views on WBD and PARA reflecting tough linear themes and slower improvement at streaming," Cahall explained, adding that it is unclear when Peacock will start to break even.
Nonetheless, the analyst noted that NBCUniversal has a lot of options at this point and could benefit from Comcast's (CMCSA) strong balance sheet.
Cahall added that NBCUniversal could add sports rights that have become "unaffordable" to its peers, it could acquire the 67% of Hulu that Walt Disney (DIS) owns and may even evaluate acquisition opportunities, if it's patient enough. 
Last month, investment firm Baird noted that Comcast (CMCSA) could be one of the beneficiaries from the World Cup, as Telemundo has the Spanish-language rights in the U.S.
Analysts are largely bullish on Comcast (CMCSA). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CMCSA a HOLD.