Comcast Corporation (CMCSA) stock is up a market-beating 8% in the still-young 2016 — a vast improvement to the slight losses it took in 2015.
Thanks to an acquisition that began back in 2009, CMSCA has a new segment that it has spent a lot of time and money on to make into a monster revenue and earnings driver.
The Universal Studios segment should no longer go unnoticed or undervalued, as the continued expansion of the parks and the opening of a new Harry Potter-themed area at Universal Studios Hollywood should push Comcast stock higher.
The Wizarding World of Comcast
The journey Universal took to Comcast was a long one. Comcast purchased 51% of NBC Universal from General Electric Company (GE) in 2009. Four years later, Comcast made a deal to acquire the remaining unowned portion. Along the way, Comcast also bought back a 50% stake in Universal Studios Florida from Blackstone Group LP (BX). Comcast paid up big from 2009 on to acquire a total interest in NBCUniversal and the Universal Studios group.
These deals gave them control over the broadcast channel NBC, a slew of cable channels, a successful movie studio … and the theme parks.
Universal Studios opened the Wizarding World of Harry Potter at its Hollywood theme park earlier this month. The opening follows successful launches in Florida and Japan … and a hike in ticket prices conveniently ahead of the Wizarding World’s launch.
Universal Studios Japan saw a similar effect with the opening of Wizarding World of Harry Potter in July 2014. The theme park set a new attendance record for the 2015 season and saw 1 million overseas visitors for the first time in park history. More than 12.7 million people visited Universal Studios Japan in 2015.
The park was opened in 2001 under a licensing agreement from Universal Studios. In 2015, Comcast announced plans to take over the park for $1.5 billion. This was a pretty smart timed acquisition to coincide with a heavily marketed 15th anniversary in 2016. The anniversary, along with the continued strength of Harry Potter, are estimated to bring 14 million visitors in 2016.
Overall, attendance continues to increase at all Universal Studios. The two U.S. theme parks have seen attendance growth outpacing Disney (DIS) and other competitors. Take a look at these figures:
| Universal Studios Hollywood | Universal Studios Florida | |
| 2010 | 5.04 million | 5.93 million |
| 2011 | 5.14 million | 6.04 million |
| 2012 | 5.91 million | 6.20 million |
| 2013 | 6.15 million | 7.06 million |
| 2014 | 6.82 million | 8.26 million |
For comparison sakes, Disneyland California had 8.77 million visitors in 2014 and Magic Kingdom in Florida saw 19.33 million visitors in 2014. In 2014, Universal Studios Florida saw growth of 17%, which far outpaced Disney’s Magic Kingdom (+4%).
Universal Studios even saw a 1% increase in market share to 22.6% for Florida, thanks to continued attendance declines at Sea World Orlando (4.7 million guests, -8%).
Comcast Will Keep Expanding
To accommodate this growth, Universal Studios is also looking at boosting revenue from additional hotels, building a fifth hotel in Orlando and expanding several others as part of its joint venture with Loews Corporation’s (L) Loews Hotels unit.
The state of Florida saw a record number of visitors (105 million) in 2015, which has led to healthy occupancy rates at hotels across the state. A new 1,000-room Caribbean themed hotel will open this summer, giving the company 5,600 rooms. Universal Studios believes it can support 10,000 to 15,000 rooms at hotels near its parks.
Investors should also take note and remember that Universal Studios is opening a theme park in Beijing China in 2019. The park will be jointly owned by Comcast and several Chinese companies. Universal Studios will enter China with strong brands like Transformers (top film in China 2014), Despicable Me and Harry Potter. This theme park also will feature the first Universal Studios-themed resort hotel.
A theme park is also set to open in South Korea in 2020, 40 miles from Seoul and near the heavy traffic Incheon International Airport.
In other words, Universal Studios’ international growth remains a story to follow.
CMSCA Financials
In the last fiscal year, Comcast saw overall revenue grow 9.3% and operating income increase 7.3%. The company’s NBCUniversal segment saw revenue grow 12% to $28.5 billion. Leading the way was the outstanding 27.3% increase in revenue for — you guessed it — CMCSA’s theme parks. Operating cash flow for theme parks also grew 33.5%.
While the theme park segment makes up less than 10% of the company’s total, it did outpace both broadcast television and filmed entertainment in operating cash flow — despite their revenues being double those of the theme parks. Margins and revenue growth are quite healthy from Comcast’s parks.
Theme park revenue grew 39% in the fourth quarter to $1.02 billion. With the opening of the new Harry Potter land in California and the growth and 100% contribution from Universal Studios Japan, Comcast’s theme park division appears to be on fire. I think this will be an area to watch for this media stock and investors and analysts may not be giving enough credit to this somewhat hidden business segment.
Look for Comcast stock to continue to trade up in 2016 and produce a nice return for investors.
As of this writing, Chris Katje did not hold a position in any of the aforementioned securities.
