Media analysts threw ice-cold water on a Wall Street Journal report Wednesday suggesting that Comcast may buy ViacomCBS and/or Roku.
"From a regulatory standpoint, ViacomCBS is a non-starter with network/station overlaps, even before considering whether network/content production market share would be an issue," Credit Suisse's Douglas Mitchelson wrote in a note to investors Thursday morning.
As for Roku, the analyst believes the Silicon Valley streaming company's $56 billion-plus market cap makes acquisition of it cost-prohibitive.
"Acquiring Roku would be highly dilutive and likely lever Comcast's balance sheet (something that management has been clear it will not do near-to-mid term), in pursuit of a new out-of-market connected TV strategy with unclear longer-term barriers to entry and customer acquisition costs, and which management has already been building internally," Mitchelson said.
Meanwhile, Bank of America analyst Jessica Reif Ehrlich said Comcast's so-called PlatCo initiative, in which it's working with Walmart and Hisense to make smart TVs powered by a Comcast OS, is in competition with Roku.
"We believe a Roku acquisition would be duplicative with [Comcast's] own Flex hardware and would add nothing from a content/IP perspective," Ehrlich said in a morning investor report.
Comcast is reportedly in the process of evaluating bold M&A moves as it tries to bolster the position of Peacock in the ultra-competitive video streaming race.
In a Thursday research note, Barclays media analyst Kannan Venkateshwar wrote that outside the obvious regulatory obstacles to additional M&A for Comcast, he remains skeptical that Comcast would consider buying ViacomCBS or Roku.
It’s only been a few weeks since Comcast chairman and CEO Brian Roberts and chief financial officer Michael Cavanagh were making the rounds at virtual industry conferences telling analysts and investors that there was no desire for a big deal. So doing a big deal, according to the analyst, would be a blow against Comcast’s credibility.
Still, Venkateshwar said it was difficult to dismiss Comcast’s M&A intentions, given its deal-making track record. Although a Roku deal could give the company a streaming advantage when coupled with its NBCUniversal and Peacock assets, he believed it would be better to build than buy.
Given Roku’s $56 billion market cap, Venkateshwar said it would make more sense for Comcast to give out free Flex devices to every household in its Comcast/Sky footprint.
“Comcast also has the choice of spending more money on Peacock and making that a free, ad-supported service, which would make it potentially bigger than the Roku Channel, especially given Comcast’s own footprint,” Venkateshwar added.
Wells Fargo media analyst Steven Cahall noted that Comcast’s past M&A endeavors have resulted in a big dip in its stock price, which should be catalyst enough to discourage any buying spree.
In a Thursday report, Cahall wrote Comcast stock dropped about 23% between January 2018 and June 2018, the period it was in a bidding war with Disney for the Fox assets.
“We think investors have just regained confidence that an uninterrupted buyback period is coming, and this confidence will now be shaken,” Cahall wrote. “Given other Media consolidation (e.g. Discovery/WarnerMedia, Amazon/MGM) we think it will be tough to lay M&A fears to rest short of levering up for a buyback.”
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