Peacock has finally crossed 20 million subscribers – with huge losses

Peacock surpassed 20 million paying subscribers in the U.S. in the final quarter of 2022, Comcast reported Thursday morning, but the milestone number comes at a high cost.

First, there’s the $978 million loss in fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). In 2022, Peacock absorbed a loss of $2.5 billion.

Oh, right? You haven’t seen anything yet. In Comcast’s post-earnings conference call, company chairman Michael Kavanaugh said Peacock’s losses would peak at $3 billion in 2023. From there, they’ll “continually improve,” he said, as NBCUniversal’s streaming services continue to break even and hopefully turn a profit.

Moffett Nathanson media analysts aren’t completely sold. “Peacock’s losses remain enormous and its path to profitability remains as elusive as ever,” they wrote in a note to investors on Thursday, questioning whether Peacock can “ever achieve winning scale or attractive long-term margins.” (Emphasis theirs.)

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Significant Comcast costs beyond Peacock were a major thorn in the side of last quarter. The company saw a $541 million increase in severance costs between October and December 2022; Comcast offered qualified employees a “voluntary retirement program” toward the end of the year.

It was not a case of withdrawal after withdrawal. Peacock added 5 million subscribers in the fourth quarter alone, its best single-quarter result since launch. Management attributed the increase in streaming subscribers to Telemundo’s World Cup, the NFL’s “Sunday Night Football” and Premiere League Soccer, as well as original movies and series such as “Halloween Ends,” which were released day after day. in theaters and the following days. Peacock.

Just before the October-December quarter, NBC and NBCUniversal cable channel Bravo pulled their next-day episodes from Hulu in favor of the Peacock, attracting cord-cutters and “Real Housewives” superfans. Comcast still owns a third of Hulu, but is expected to sell it to Disney for a hefty price within the next year. An alternative theory, one Comcast CEO Brian L. Roberts likes to float: What if Comcast buy it out Disney Share it?

Hulu or no Hulu, well Roberts is talking about the streaming business today. “We couldn’t be more positive about our trajectory so far,” he said on the fourth-quarter conference call. “In terms of investment, we are where we expected to be and we are well above the pay sockets. We wouldn’t make the investment if we didn’t see the investment in Peacock … paying off over time.”

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Roberts’ company saw enough of a return on its business in the fourth quarter to reassure investors on Thursday. Wall Street estimates Comcast could post earnings of 77 cents per share on revenue of $30.31 billion. Parent NBCUniversal reported revenue of $30.55 billion and adjusted earnings of 82 cents per share, beating analysts’ estimates. Comcast posted a profit of $3 billion in the fourth quarter, with adjustments of $3.5 billion.

Comcast’s cable arm is still by far its largest segment. All of its key performance indicators were “fairly good,” Moffett Nathanson wrote.

Moffett called the theme parks a “highlight” for NBCUniversal. UK broadcaster Sky, which is a ‘problem’, stands out for all the wrong reasons, namely its cash flow problems.

In its own quick analysis, Wells Fargo said Comcast’s balance sheet “remains in solid shape.” NBCU’s advertising revenue of $2.9 billion and distribution revenue of $2.6 billion met the bank’s expectations; Peacock’s own revenue ($660 million) beat estimates by $81 million. The nearly $1 billion quarterly loss was also predictable, making it at least a little easier to swallow for savvy investors.

Wells Fargo’s price target for Comcast stock ( CMCSA ) remains at $38, which is a bit below the current market; Moffett Nathanson has a target price of $46.

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