Wells Fargo analyst Jennifer Fritzsche says Comcast's filing on COVID-19 impact "not overly surprising"
Shares of Comcast (CMCSA) are in the spotlight after the company announced that the ongoing COVID-19 pandemic could have a "material adverse impact" on results over the near- to medium-term. Meanwhile, the President of the International Olympic Committee, Thomas Bach, and the Prime Minister of Japan, Shinzo Abe, announced that the Olympic games will be rescheduled to no later than summer 2021. Comcast had previously said that its upcoming streaming service, Peacock, would feature live coverage of the 2020 Tokyo Olympics.
'MATERIAL ADVERSE IMPACT': In a regulatory filing, Comcast stated that, "The impact of coronavirus disease 2019 - COVID-19 - and measures to prevent its spread are affecting our businesses in a number of ways. For example, we have closed all of our theme parks; we have delayed theatrical distribution of films both domestically and internationally; and the creation and availability of our film and television programming in the United States and globally has been disrupted, including from the cancellation or postponement of sports events, including possibly the Olympics, and suspension of entertainment content production. As they affect Sky, these impacts materially exacerbate what was an already deteriorating economic environment and advertising market in the UK and Europe in 2019. Our Comcast Cable business, while our network performs well to meet the challenge of business and schooling from home, will not be unaffected either as economic stress impacts our residential and business services customer base."
"We expect that the ultimate significance of the impact of COVID-19 on our businesses will vary but will generally depend on the extent of governmental measures affecting day to day life and the length of time that such measures remain in place to respond to COVID-19. At this point, it is impossible to predict such extent and duration and the degree to which supply and demand for our products and services, including advertising, will be affected. This uncertainty makes it challenging for management to estimate the future performance of our businesses, particularly over the near to medium term. However, the impact of COVID-19 could have a material adverse impact on our results of operations over the near to medium term."
Commenting on the announcement, Wells Fargo analyst Jennifer Fritzsche told investors that the filing on the potential COVID-19 impact is "not overly surprising given the fluid nature of the COVID situation." However, the analyst noted that “the 8K indicates a more severe macro scenario." While she still believes the connectivity part of Comcast's business should represent more of a stable business, Fritzsche pointed out that the company did say in its filing that this segment "will not be unaffected either," which she believes will be felt more in the second and third quarters. Further, the analyst would not be surprised to hear limited guidance from the company when Comcast reports quarterly results in April given the many moving parts on its business. Fritzsche has an Overweight rating on the shares.
OLYMPIC GAMES DELAYED: The President of the International Olympic Committee, Thomas Bach, and the Prime Minister of Japan, Shinzo Abe, announced that they "have concluded that the Games of the XXXII Olympiad in Tokyo must be rescheduled to a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community." The leaders agreed that "the Olympic Games in Tokyo could stand as a beacon of hope to the world during these troubled times and that the Olympic flame could become the light at the end of the tunnel in which the world finds itself at present. Therefore, it was agreed that the Olympic flame will stay in Japan. It was also agreed that the Games will keep the name Olympic and Paralympic Games Tokyo 2020."
Comcast had previously said that its upcoming streaming service, Peacock, would feature live coverage of the 2020 Tokyo Olympics. Meanwhile, Discovery (DISCA), which holds the European broadcast rights, said it has an insurance policy in case the Olympics were cancelled.
PRICE ACTION: In morning trading, shares of Comcast have dropped about 1% to $33.92.
Keywords: Coronavirus, virus, outbreak, Covid-19, pandemic, olympic games, Tokyo Olympics