Comcast is spinning off cable assets like USA Network and CNBC, creating new publicly traded companies.
From Nasdaq: 2024-11-28 03:36:00
In this podcast, Motley Fool analysts discuss Nvidia’s quarter and data center growth, Comcast’s spin-off of cable assets, and MicroStrategy’s bond offering. Then, they review Sunbelt REIT EastGroup Properties on The Motley Fool’s Scoreboard.
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Comcast is spinning off its cable assets, including USA Network and CNBC, with an expected value of $7 billion. Companies spin off departments to focus on faster-growing parts, allocate capital efficiently, and create new publicly traded companies for investors. This move is similar to Kellogg’s spin-off of its cereal division and GE’s NBC Universal split.
Nvidia’s phenomenal quarter met expectations with revenue exceeding 100% growth in the data center business. With a gross margin of 75%, Nvidia stands out in hardware and chip sales. The company’s ability to sell at high rates highlights its unique position compared to competitors like Intel and AMD. Comcast is considering spinning off its cable channels like USA Network, MSNBC, and CNBC to focus on streaming service Peacock. These cable channels, with live sports and news coverage, may not fit well in the streaming world. Cable news viewership is slipping, with aging demographics and declining trust. The spin-off could create a well-funded startup environment for these channels but faces challenges attracting younger viewers and adapting to changing media landscapes. Shareholders are not reacting strongly to the news, as they will still own both Comcast and the spin-off entities, resulting in minimal impact on stock value. Comcast paid a dividend of 45 cents a share in 2014, now $1.24 in 2024. While they’re returning capital to shareholders, some see them as a utility company. MicroStrategy offering 0% interest convertible bonds for institutional investors to buy Bitcoin. Buyer beware due to complex conversion options. Institutional interest seen as a hedge against MicroStrategy’s volatile stock price. EastGroup Properties, a REIT without a Chief Investment Officer, may be a good thing. Premium Motley Fool members can access Scoreboard episode breakdown of EastGroup Properties for in-depth analysis. Vanta helps companies prove security compliance and build customer trust with automated evidence collection for frameworks like SOC 2, ISO 27001, and HIPAA. Get $1,000 off Vanta at vanta.com/fool. Anand Chokkavelu hosts Matt Argersinger and Anthony Schiavone for a quick 1-10 rating of EastGroup Properties, a Sun Belt area focused industrial REIT. Business, management, financials, valuation, and armchair CEO discussion covered in 12 minutes or less. EastGroup Properties, an industrial REIT focused on the Sun Belt, receives a high rating of 8/10 for its strategic real estate and alignment with e-commerce, migration, and supply chain trends. However, concerns about its smaller size and capital-intensive development activities prevent a higher score.
EastGroup’s business is also praised for its internally developed properties, diversified tenant base, and low recurring capital expenditures. While the company benefits from e-commerce and migration trends, it is still somewhat reliant on external economic forces, leading to a rating of 7/10.
CEO Marshall Loeb receives high praise with a rating of 9/10 for his impressive track record, outperforming the S&P 500 by over 80 percentage points since 2016. EastGroup’s dividend growth and management of shares and debt also reflect strong leadership. Another analyst rates management at 8/10, highlighting EastGroup’s unique compensation incentives and decentralized decision-making structure. The financials of EastGroup Properties are rated highly, with occupancy rates at 97%, rental rates up 60%, and strong cash flow growth. The company has a solid balance sheet with low debt levels and consistent dividend growth. Analysts project annualized returns of 10-15% over the next five years due to tailwinds in the e-commerce and Sun Belt migration sectors.
Despite strong financial performance, concerns about valuation lead to a lower confidence level in EastGroup Properties’ stock. The stock is trading at a high multiple of its FFO per share, which impacts the potential for double-digit returns. Analysts rate their confidence in the stock at a seven due to these valuation concerns.
In comparison to EastGroup Properties, analysts prefer Prologis as their top pick in the real estate sector. Prologis is a larger company with a market cap of over $100 billion, offering access to better capital markets and a stronger management team. While both companies are respected, Prologis is favored for its size and stability in the market. Matthew Argersinger and Ricky Mulvey have positions in various companies including Atlassian, EastGroup Properties, and Prologis. The Motley Fool also holds positions in Advanced Micro Devices, Nvidia, and Bitcoin. Recommendations include long calls on Prologis and stocks like Comcast and WK Kellogg. The views expressed are solely those of the authors.
Read more at Nasdaq: Comcast Spins Out Cable Networks