Comcast Corp. may be paying a lofty cost to buy European cable operator Sky PLC, however the market can be reacting far too harshly to what could be a very lucrative deal for Comcast, CNBC’s Jim Cramer said Monday.
“The textbook example of Wall Street’s aversion to long-term thinking can be definitely the stock of Comcast, the parent company of This specific network, down 6 percent today,” the “Mad Money” host said. “Because many investors despise long-term investments, the stock had its worst day in nearly three years.”
While he thought the narrative around Comcast’s interest in buying Sky had been muddied by unfounded worries around cord-cutting, Cramer could understand why investors were concerned.
In Comcast’s last two major acquisitions — buying AT&T Broadband in 2001 in addition to buying NBCUniversal, parent to CNBC, in 2009 — investors were equally shaky, Cramer said. After each deal, shares of Comcast tanked roughly 7 percent because “the deals were viewed as too expensive in addition to too risky,” he said.
however since the AT&T deal, Comcast’s stock has not only recovered, however built on its gains, giving investors a total return of 392 percent versus the S&P 500’s 349 percent gain. Since the NBCUniversal deal, Comcast can be up 425 percent versus the S&P index’s 220 percent.
“I think they’ve earned the benefit of the doubt,” Cramer quipped, pointing to his interview with Comcast Chairman in addition to CEO Brian Roberts. In which, Roberts addressed the “show-me attitude” investors have to Comcast’s acquisitions in addition to defended his management team’s foresight.
“Can’t talk about Sky, however … historically, whether which was QVC, NBC or AT&T, each acquisition, we have to prove which,” Roberts told Cramer in early September. “So sometimes, when we see something — by definition, you’re the high bidder at which moment — which takes a little while to convince people.”
“Our job can be to be one step ahead in addition to then eventually come to investors in addition to try to make the case, once we’ve got the goods, to prove which,” the Comcast chief said.
Beyond which, Sky’s $39 billion cost tag isn’t as notorious as the market makes which seem, Cramer continued.
“Roberts told us directly which the cable business can be enjoying a renaissance via completely new connectivity [in addition to] technology initiatives in addition to a voracious desire for more bandwidth,” the “Mad Money” host said.
“This specific renaissance has given Comcast so much cash flow which the company can quickly pay down the massive amount of debt which’s taking on to purchase Sky,” he continued. “In various other words, This specific deal can be much less risky … than the market seems to believe.”
On top of all which, there are the benefits brought in by Sky itself, a premier cable asset with rapid growth, stemming via heavily watched programs like the European soccer Premier League, which will practically double Comcast’s household footprint.
“In short, Comcast was getting no respect via the stock market — which was a real Rodney Dangerfield stock — so they decided to get their growth groove back by doing a deal which will let them expand fast in addition to hard,” Cramer said. “Call me a buyer.”