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BTIG's Greenfield: Comcast Buying DreamWorks Is A 'Mistake'

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Dreamworks Animation SKG, Inc. NASDAQ:DWA, Comcast Corporation NASDAQ:CMCSA - BTIG's Greenfield: Comcast Buying DreamWorks Is A 'Mistake'

Comcast Corporation CMCSA 0.63% has agreed to purchase Dreamworks Animation Skg Inc DWA 24.19% for $3.8 billion. BTIG’s Richard Greenfield termed the purchase a “mistake.”

While $3 billion in cash is relatively meaningless for Comcast, it reflects the company’s lack of financial discipline and should be a cause for investor concern, analyst Richard Greenfield commented.

Why The Deal Is A Mistake

Greenfield highlighted various reasons for the potential deal not being the best decision for Comcast:

  • DreamWorks’ shares appear overvalued. The company’s core movie business continues to struggle, while the television business is “meaningfully overearning.” The deal with Netflix, Inc. NFLX 1.53% would limit Comcast’s ability to leverage DreamWorks’ content into a direct video business.
  • Even if DreamWorks is able to exit the Netflix deal early or create additional products for Comcast, the quality of the television content has not been compelling so far.
  • The company’s track record in making successful animated movies is underwhelming.
  • The performance of DreamWorks’ movies has largely been driven by heavy spending on voice talent and promotions.
  • Comcast already owns a superior animation studio and should look to invest in it. “Comcast should inject meaningful capital into Illumination with a far more compelling ROI than overpaying for DWA,” Greenfield wrote.

The $3 billion acquisition price overvalues DreamWorks’ Awesomeness TV.

The analyst commented that buying DreamWorks would not transform NBC Universal into Walt Disney Co DIS 0.21%.

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