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RCI to Gain MLSE's Majority Control: How Should You Play the Stock?
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Rogers Communications (RCI - Free Report) , on Wednesday, announced that it plans to buy out Bell’s 37.5% ownership stake in Maple Leaf Sports & Entertainment (“MLSE”), one of the leading sports and entertainment organizations in Canada.
RCI’s current deal with Bell is expected to close by mid-2025, making it the largest owner of MLSE with a 75% holding. Rogers will consider expanding its MLSE ownership further in the future. Its Bell stake buyout is valued at C$4.7 billion.
The Bell stake buyout in MLSE is a major strategic step taken by Rogers to increase its prospects without getting further leveraged.
The deal will help RCI capture a bigger share of the sports and media market in Canada. It expands Rogers’ portfolio as the company already owns Toronto Blue Jays, Rogers Centre and Sportsnet, the number one sports network in Canada.
RCI’s partnerships with the Vancouver Canucks, the Edmonton Oilers, the Calgary Flamesand Amazon (AMZN - Free Report) for the NHL is positive. It has expanded content portfolio through partnerships with Warner Bros. Discovery, NBCUniversal and Disney.
Will these investments improve RCI shareholder’s earning prospects? Let’s find out.
RCI’s Expanding Media Portfolio to Aid Prospect
In the first half of 2024, Media Revenues, consisting of sports media and entertainment, increased 5% year over year to C$1.22 billion due to higher sports-related revenue, primarily at the Toronto Blue Jays.
RCI is investing heavily in Canadian Sports and has invested C$14 billion over the past decade.
Rogers and Amazon inked a two-year agreement in Canada to stream Monday night NHL hockey exclusively on Prime Video.
Apart from sports content, RCI’s deals with Warner Bros. Discovery and NBCUniversal helped it to acquire the most-watched lifestyle and entertainment content. Rogers has also launched Disney+ for eligible Ignite TV customers at no additional cost.
However, the Media segment faces headwinds due to the sluggish advertising market. RCI is investing heavily to increase its viewership, which will lead to a cash drain.
RCI Shares Fall 15.3% YTD: Will Shares Recover?
Rogers shares have declined 15.3% year to date (YTD), underperforming the broader Zacks Cable Television industry’s decline of 10.4% and Zacks Consumer Discretionary sector’s return of 0.3%.
Rogers is facing intense competition in the wireless operations market, as well as in the communications cable market. Its topline growth is also suffering due to an ongoing price war among country’s telecom providers like TELUS and BCE.
Rogers also lagged its industry peers like WideOpenWest (WOW - Free Report) and Charter (CHTR - Free Report) . While shares of WOW have returned 29.4%, Charter has dropped 12.6% YTD.
RCI expects its 2024 total service revenues to increase by 8%-10% from its 2023 figure of C$16.85 billion, driven by its strong portfolio.
However, RCI’s high debt level is a matter of concern. The debt leverage ratio was 4.7 times as of June 30, 2024. It targets to reach debt leverage ratio of 4.2 times.
RCI has assured the investors that the latest Bell stake buyout will not affect this ratio as it will involve private investors.
For 2024, Rogers expects capital expenditure to be between C$3.80 billion and C$4 billion and free cash flow is expected in the range of C$2.9-C$3.1 billion.
What Should Investors Do With RCI Stock?
RCI shares are currently undervalued, as suggested by a Value Score of A.
However, given the near-term challenges related to cash flow and debt leverage, we expect prospects to remain muted.
Rogers Communications (RCI - Free Report) , on Wednesday, announced that it plans to buy out Bell’s 37.5% ownership stake in Maple Leaf Sports & Entertainment (“MLSE”), one of the leading sports and entertainment organizations in Canada.
RCI’s current deal with Bell is expected to close by mid-2025, making it the largest owner of MLSE with a 75% holding. Rogers will consider expanding its MLSE ownership further in the future. Its Bell stake buyout is valued at C$4.7 billion.
The Bell stake buyout in MLSE is a major strategic step taken by Rogers to increase its prospects without getting further leveraged.
The deal will help RCI capture a bigger share of the sports and media market in Canada. It expands Rogers’ portfolio as the company already owns Toronto Blue Jays, Rogers Centre and Sportsnet, the number one sports network in Canada.
Rogers Communication, Inc. Price and Consensus
Rogers Communication, Inc. price-consensus-chart | Rogers Communication, Inc. Quote
RCI’s partnerships with the Vancouver Canucks, the Edmonton Oilers, the Calgary Flamesand Amazon (AMZN - Free Report) for the NHL is positive. It has expanded content portfolio through partnerships with Warner Bros. Discovery, NBCUniversal and Disney.
Will these investments improve RCI shareholder’s earning prospects? Let’s find out.
RCI’s Expanding Media Portfolio to Aid Prospect
In the first half of 2024, Media Revenues, consisting of sports media and entertainment, increased 5% year over year to C$1.22 billion due to higher sports-related revenue, primarily at the Toronto Blue Jays.
RCI is investing heavily in Canadian Sports and has invested C$14 billion over the past decade.
Rogers and Amazon inked a two-year agreement in Canada to stream Monday night NHL hockey exclusively on Prime Video.
Apart from sports content, RCI’s deals with Warner Bros. Discovery and NBCUniversal helped it to acquire the most-watched lifestyle and entertainment content. Rogers has also launched Disney+ for eligible Ignite TV customers at no additional cost.
However, the Media segment faces headwinds due to the sluggish advertising market. RCI is investing heavily to increase its viewership, which will lead to a cash drain.
RCI Shares Fall 15.3% YTD: Will Shares Recover?
Rogers shares have declined 15.3% year to date (YTD), underperforming the broader Zacks Cable Television industry’s decline of 10.4% and Zacks Consumer Discretionary sector’s return of 0.3%.
Rogers is facing intense competition in the wireless operations market, as well as in the communications cable market. Its topline growth is also suffering due to an ongoing price war among country’s telecom providers like TELUS and BCE.
Rogers also lagged its industry peers like WideOpenWest (WOW - Free Report) and Charter (CHTR - Free Report) . While shares of WOW have returned 29.4%, Charter has dropped 12.6% YTD.
RCI expects its 2024 total service revenues to increase by 8%-10% from its 2023 figure of C$16.85 billion, driven by its strong portfolio.
However, RCI’s high debt level is a matter of concern. The debt leverage ratio was 4.7 times as of June 30, 2024. It targets to reach debt leverage ratio of 4.2 times.
RCI has assured the investors that the latest Bell stake buyout will not affect this ratio as it will involve private investors.
For 2024, Rogers expects capital expenditure to be between C$3.80 billion and C$4 billion and free cash flow is expected in the range of C$2.9-C$3.1 billion.
What Should Investors Do With RCI Stock?
RCI shares are currently undervalued, as suggested by a Value Score of A.
However, given the near-term challenges related to cash flow and debt leverage, we expect prospects to remain muted.
RCI currently has a Zacks Rank #3 (Hold), which implies that investors may want to wait for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.