Analyst: Comcast Could Have $28B to Spend

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Comcast is set to release its second-quarter earnings this Thursday, but one analyst is looking much farther out into the future, adding in a research report that the nation’s largest cable operator could have as much as $28 billion to spend over the next two-and-one-half years on acquisitions, share repurchases and internal growth.

In his report, Pali Research media analyst Richard Greenfield estimated that Comcast could tap that much financial firepower while still keeping its leverage ratio at an investment-grade three times cash flow. And that could nearly double to more than $43 billion if the cable operator were willing to tick up leverage to a respectable four times cash flow.

Greenfield noted that available cash could be even higher, given that any assets Comcast buys with that cash will in turn generate additional cash flow.

“Bottom line: Comcast has lots of options,” Greenfield wrote.

But what to do with all of that financial muscle? Greenfield wrote that Comcast is likely taking a very long-term view of its business -- 10-20 years instead of 2-3 years. And in light of that long-term focus, the analyst suggested five areas that should be drawing management’s attention: expanding its foray into wireless voice beyond its Sprint Nextel partnership; using its expanding broadband pipe -- channel bonding could allow cable operators to eventually deliver speeds of up to 100 megabits per second -- to address the growth in online video; whether or not to buy an Internet portal like AOL or Yahoo; expanding its ownership of cable networks; and expanding its cable footprint horizontally, including overseas.

Greenfield added that given management’s long-term outlook, he doubted that Comcast would devote most of its available cash to stock repurchases. And though Greenfield is encouraged with Comcast’s growth prospects over the next few years, he added that over the next 10 years or more, the company appears to be in “strategic limbo” -- its valuation upside in the future could be limited unless its plan related to the issues he discussed above becomes more visible.

“Maybe Comcast should be focusing on building out wireless, expanding its Internet presence and increasing its exposure to content; regardless of what investors think/want (Rupert Murdoch of News Corp. certainly doesn’t ask/care about investor approval of his purchase of MySpace, Dow Jones, etc.),” Greenfield wrote.

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