Theme Park Throwdown: Q4 Makes Clear Comcast Is Gunning for Disney

Comcast Q4
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Comcast’s Q4 earnings results illustrate that investors need to take a new view of a company primarily known for cable, broadband and streaming service Peacock because of how aggressive its theme-park expansion is.

Management noted on the earnings call it was always looking at ways to expand theme parks and that “it’s a business that we wanted to deploy capital to.” ROI is generally pretty high thanks to the strong free cash flow generation.

With Universal Studios Hollywood expansion Super Nintendo World opening in less than a month and Universal Studios Orlando expansion Epic Universe in summer of 2025, Comcast has its sights set on two additional theme park concepts in Frisco, TX, and Las Vegas. The company already owns and operates two theme parks in the U.S. and one each in Tokyo, Singapore and Beijing.

With the opening of Epic Universe, Universal Orlando will be better leveraging its IP to extend NBC Universal’s brands to compete more directly with Disney’s parks in Orlando and California.

But that’s not to say these grand expansion plans don’t carry a hefty price tag. According to some early reported estimates, Epic Universe will double the size of the current park and cost Comcast roughly $1 billion. For comparison, Disneyland’s Star Wars Galaxy’s Edge expansion reportedly cost around $600 million and went well over budget.

Comcast revealed its theme parks business was a major bright spot and generated another quarter of record EBITDA. Comcast’s balance sheet looked solid with consolidated net leverage of 2.4x and free cash flow of $12.6 billion in 2022.

Theme parks are a heavy investment, but judging by the way the business has been performing following the pandemic, it appears Comcast theme parks expansion projects are to capitalize on the overall positive demand trends across the industry recently.

Not only has attendance been high, but theme park attendees are also spending much more per visit than ever before. According to decision intelligence company Morning Consult’s weekly survey, Americans' comfortability visiting theme parks is at its highest level since the start of the pandemic, even as recession fears loom.

In addition, Comcast would be positioning itself as a better competitor to its biggest theme parks rival Disney. It’s worth noting NBCU theme parks are thriving without implementing a tiered admission price like rival Disney.

Disney has long dominated the theme parks game in the U.S. with many visitors staying for at least a week at its park in Orlando. Conversely, Universal Studios Orlando was usually viewed as a three-to-four-day destination.

NBCU’s new children-focused theme park in Texas and Horror Nights-themed concept in Vegas will be smaller scale and far less expensive than Epic Universe, according to outgoing CFO Mike Cavanagh. The two new parks are a sort of test of the consumer appetite for newer concepts that could eventually be expanded internationally. Cavanagh said Thursday on the earnings call that peak spend for theme parks will likely be in 2023 and 2024.

The theme parks biz was the bright spot in Comcast’s quarter. Costs are rising across numerous business segments, and it's hard to ignore the cash burning business that is streaming service Peacock. At just 20 million paid subscribers as of the end of 2022, the biz also racked up nearly $1 billion in adjusted EBITDA losses. Cavanagh said the company expected Peacock losses to be up to around $3 billion in 2023.

Comcast stock, along with most of the media industry, is outperforming the broader market so far this year but has been down substantially over the past 12 months. This year will be a balancing act for Comcast, and investors will be paying close attention to how the company juggles its solid-for-now balance sheet with mounting costs and heavy investments.