Adam Levine-Weinberg

Adam Levine-Weinberg
Contributor since: 2011
Two things:
First, the distinction that Nordstrom is high-end and Nordstrom Rack is low-end is not as clear-cut as you describe. There are plenty of people who shop at both. And there are plenty of things at Nordstrom that are cheaper than other items at Nordstrom Rack. The difference is in the experience -- full-line stores are high-touch, and off-price stores are not. I don't think customers are confused about the difference.
Second, sales rose only 11% last quarter. If the online business returns to 30% growth in the future, the stock will rise well above your target without having to split the business.
This is an interesting analysis, but you are unrealistically expecting that United (or any other airline) can get the same yield with 30% more seats. If that were true, airlines would always exclusively fly the biggest versions of each airplane.
A more realistic assumption would be that the estimated 30% increase in seating capacity on the 777-300ER drives 15%-20% more revenue than the 787-9. It would be interesting to see how that impacts the analysis.
It's all in the report you provided. Vancouver-Asia traffic is currently about 60% higher than Seattle-Asia. On the other hand, Anchorage doesn't have any flights to Asia and hasn't in a very long time. Flights to Asia out of Anchorage were something that only occurred when typical airplane ranges were shorter, necessitating more for intercontinental travel.
That said, I don't think Vancouver and Seattle compete that much, despite being pretty close together. (Significant extra costs/hassle to connect in Canada rather than connecting in the U.S.) Sea-Tac is mainly competing with the two bigger Asian gateways on the U.S. West Coast: SFO and LAX, while Vancouver is mainly serving traffic to/from Canada.
I agree with SunnyinPDX: there's no point to Delta acquiring Hawaiian Airlines. (It seems extremely unlikely that it would acquire Alaska Airlines either, due to the price as well as the virtual certainty that DOJ and DOT would sue.)
Honolulu is a great destination but a terrible hub. Just for example, Portland-Seattle-Tokyo is about 4900 miles; Portland-Honolulu-Tokyo is about 6400 miles. It only makes sense to go through Honolulu to Australia and New Zealand, which is a very limited market. Probably 90%-95% of the traffic on Hawaiian Airlines' flights to Asia consists of tourists coming over from Asia to Hawaii.
So all a merger would do is replace one brand that has a very strong following for flights to Hawaii with another brand that is very well respected generally but has no special appeal for flights to/within Hawaii. And there would be no meaningful synergies.
I think we are basically on the same page. What I was originally trying to state was that analysts' estimates in various databases are based on accounting earnings, not cash earnings. As a result, the 2016 estimates for AAL are not all comparable to one another, because some analysts appear to be assuming no taxes while others are building in a normal tax rate for accounting purposes in their estimates. Everybody agrees that the cash tax rate is effectively zero in 2016.
By January we will find out whether management is reversing the valuation allowance, and I'd expect the analysts' estimates to move closer to one another at that point.
@markcc: That's not how the accounting works. There is a big gap between when an airline reverses its valuation allowance and starts booking taxes in its earnings statements and when it actually starts paying cash taxes to Uncle Sam. For example, Delta reversed its valuation allowance at the end of 2013 based on its profit trends, but it hasn't paid cash taxes yet and isn't likely to pay until 2017 or 2018, even at current profitability. US Airways started booking taxes during 2013 even though it wasn't paying any cash taxes, and then it stopped after the merger with American because it added a whole new pile of losses.
The key point here is that it is relatively straightforward to calculate when an airline might start paying cash taxes based on how large its net operating loss position is. (Even then, it's not as simple as it seems, because if you're buying a lot of planes you can defer quite a bit of tax with accelerated depreciation.) But it's even more complicated to determine when to start booking taxes. As I stated before, I think AA will probably start booking taxes next year. However, considering its existing NOLs and how much it's spending on CapEx, it won't be paying cash taxes for a few more years.
@markcc: Analysts have taken a variety of approaches in accounting for the tax benefit. Many of them just focus on the cash impact, which won't be felt until later than the accounting impact.
On the accounting side, there's a significant subjective component to deciding when to reverse a tax valuation allowance and start accruing taxes again. I am pretty sure that some analysts' models assume that is going to occur for 2016, while others won't factor that into their EPS estimates until American Airlines confirms that it is reversing the valuation allowance. Otherwise, it's hard to understand why there's a more than 100% spread between the lowest and highest analyst estimates for 2016. ($4.40 and $9.06, according to Yahoo Finance.) I think they're just comparing apples and oranges.
My point was just that if you're basing a valuation off of forward earnings estimates, it's important to recognize that the estimates aren't all treating the tax issue the same way.
I agree that AAL is undervalued. To those who say that you can't fight the market, it's all a matter of your mindset and time horizon. If your goal is to make a big profit in the next few months, then sure, you can't fight the market. But if you're willing to wait a few years to get rewarded, of course you can fight the market. And meanwhile, AAL is helping with its big buyback program.
There was a time not that long ago when most airline stocks were trading for 4X earnings. Sometimes, it seemed like that was just all that investors were willing to pay for airline stocks and you couldn't "fight the market". That was true until it wasn't true anymore... and then all the airlines skyrocketed. Personally, I'd rather own the stocks if I believe in their long-term potential over attempting to time the market.
One technical point: I'm not sure how reliable the forward earnings numbers are because of American's tax situation. Right now, the company still isn't accruing any taxes, but it may start accruing taxes for accounting purposes in 2016 (and almost certainly by 2017). That would cause an immediate 35%-40% hit to EPS, all else equal. The cash impact wouldn't come until a few years later, though, mainly because of accelerated depreciation on all of AAL's jet purchases.
This article has (shockingly) ignored the fact that JetBlue has already reported preliminary unit revenue statistics for each month of the quarter.
With JetBlue's unit revenue up 4% in April, up 1% in May, and down 1% in June, it's already clear that unit revenue will be up for the full quarter, probably by 1% or a smidge more. Capacity also grew about 7.5%. Put that together and you have high single-digit revenue growth, roughly in-line with the analyst consensus. Which is not surprising, since all of the relevant data has already been reported in preliminary form.
The more interesting question will be what happens in Q3. Most of the airlines reporting recently have offered up pretty weak unit revenue guidance for the summer. I think JetBlue will outperform again, but it may not be able to keep unit revenue above the flat line.
@upatnite2: I guess what I'm saying is that there is a difference between the stock price plummeting and the stock price plummeting for a reason. Based on the price action from the past few days (which was basically driven by the news that HA's margins will "only" expand by a few points this year rather than 8-10 points like many were hoping), I don't think anything terrible would have to happen to HA for the price to keep falling in the short term. (I don't expect it to keep falling, but ultimately I have no idea what will happen in the short run and don't really care.)
If HA stock falls for no good reason in the short term, that benefits long-term shareholders insofar as the company uses the opportunity to retire convertible debt and/or warrants. Obviously, if something really bad happened to the company from a fundamental perspective, that would be a different story. Even that can be overstated, though.
For example, a spike in oil prices might send airline stocks tumbling. But these companies have shown in the past couple of years that they can make plenty of money at high fuel prices. And oil has demonstrated in the past 6 months that any price move is temporary and could change on a dime depending on the supply-demand balance and market psychology.
@upatnite2: The dilution from the convertible notes and warrants increases as the stock rises. The convertible notes are hedged, although I confess that I don't quite understand what happens with those hedges (essentially call options on the stock) as HA starts to buy back convertible debt. One key point, though, is that the hedges offset the dilution from the convertible notes but that impact isn't included in the ongoing diluted share count. When everything settles next year, the hedges should at the very least offset the convertible notes.
As for the warrants, the strike price is $10. So at $10, there's no dilution. At $15, with net share settlement, only 3.6 million shares get issued. But at $20, 5.5 million shares would be issued; at $30, 7.3 million shares get issued. So if the HA stock price trends lower, the diluted share count growth will reverse. Additionally, I am hoping that HA takes advantage of the lower share price to more aggressively repurchase convertible debt at favorable prices. For long-term shareholders, it actually might be a good thing for the stock to pull back in the short run.
One other thing: HA does have some extra cash, but it would be dangerous to run the airline with less than $300-$400 million of cash given the volatility of the airline business and significant planned CapEx towards the end of the decade.
I think you all are too focused on the short-term. Hawaiian faced a similar situation in late 2012 with weakening foreign currencies (particularly the yen) and overcapacity to the West Coast -- and at that time it didn't have the benefit of cheaper fuel. The stock "plummeted" from $7 down to the low $5 range by April 2013. Then it quintupled in less than 2 years.
In other words, this too shall pass. Airlines will re-adjust capacity if routes to Hawaii are performing significantly below the rest of their networks. And when Hawaiiian Airlines gets its A321neos starting in 2017, it will have more of an ability to tweak its own capacity to the West Coast based on demand. In the meantime, HA is still projecting earnings growth/margin expansion in 2015, and it now trades at just 12-13 times trailing earnings.
Also, HA's fuel hedging losses really aren't that big. It's projected full-year fuel cost is only $0.20 higher than American Airlines' un-hedged projection. So it's probably capturing 80% or more of the drop in oil prices.
@Dothemathman: You're right that HA is more leveraged than many of its competitors. But its leverage is really quite manageable, and with the company's projected free cash flow for 2015-2016, it should be able to significantly reduce its debt burden in the next 2 years.
I live on the East Coast, so I can't say I've seen this first-hand, but it seems to me like Virgin America has a very devoted following in San Francisco, and to a lesser extent in LA. United is the only competitor there with real scale (maybe Southwest if you include all the Bay Area airports). Virgin America is much more tech savvy than either of those airlines, which is really important there -- United is still finishing up Wi-Fi installations this year. The first class hard product is also better than anything else offered in the U.S., outside the JFK-SFO/JFK-LAX routes.
In terms of award redemption, Virgin America has partnerships with several other airlines, so you can use Elevate points to get to popular destinations like Hawaii, London, Australia, Tokyo, Hong Kong, etc. Still far from global, but you're not limited to the continental U.S.
As for competition, I think Virgin America is being smart by focusing its energy on transcontinental routes and routes to slot/gate constrained airports. For the most part, it's avoiding the short/medium haul routes where competitors like Southwest and Spirit thrive. And the Virgin America amenities (extra space, better IFE, mood lighting, etc.) are more valuable on longer flights.
@markcc: Virgin America is definitely planning for growth. As you probably know, there are 10 planes coming between the middle of this year and the middle of next year. That's already about 19% growth, assuming that utilization stays flat in the long run. Beyond that, the company plans to grow by leasing A320s (or possibly buying through a small incremental Airbus order) until its A320neos start arriving in 2020. With Airbus churning out 500+ A320 series planes a year, it won't be that hard to find 15-20 extra planes in the 2017-2019 timeframe if the business environment remains solid.
I do agree that there is substantial buyout potential, and I think JetBlue is the main candidate. I don't expect a deal to happen for a few years, though -- both airlines have other fish to fry. A premium shouldn't be a problem, even if VA is fairly valued on a standalone basis. There would be huge merger synergies: on the revenue side you can bring in a lot of new business by combining a strong East Coast airline with a strong West Coast airline, and on the cost side you can eliminate a lot of overhead, consolidate airport operations, etc.
I don't think the fuel price discrepancy should have been that much of a surprise to the market. In Q3, Virgin America's economic fuel expense was $3.13/gallon vs. $2.87/gallon for Delta, so the gap between the two is essentially unchanged. Delta had about 10-11 cents of benefit from refinery profits in Q4 which is obviously something that Virgin America didn't have. The rest of the difference is probably a combination of hedging philosophy (Virgin America will probably have bigger hedging losses in Q1/Q2 but then much less in the second half of the year) and some systematic differences in fuel costs based on the airports they serve.
Obviously, it's a bummer that there will be big hedging losses in Q1, and to a lesser extent in Q2. Fortunately, that has no bearing on the long-term value of the company.
I don't think there would have been much point in Virgin America guiding to Q3 and Q4 fuel costs. It totally depends on where oil prices will be then, and that's anybody's guess!
Amazon isn't generating free cash flow in any meaningful sense of the term. I think this is a mistake that many investors are making.
Why do investors care about FCF? Because ultimately this is cold hard cash that can be used for acquisitions or returned to shareholders through dividends or share repurchases.
But Amazon's FCF figure doesn't include non-cash stock compensation, which is currently running at around $1.5 billion a year and steadily increasing. If Amazon paid its incentive compensation in cash rather than in stock, it would have negative FCF.
To put it another way, if Amazon "returned" all of its FCF to shareholders through buybacks, it would still be diluting shareholders over time. It isn't generating enough cash to cover the cost to shareholders of issuing stock to employees.
The flaw in your hypothesis is shown by Chipotle's performance since it went public. It had a very high valuation back then, which was more than borne out by its subsequent earnings growth. Chipotle has far more growth potential than most companies in growth industries.
In my opinion, the worst case scenario for Chipotle's long-term global unit potential is around 10,000. (About 6 times the current size.) The best case scenario is much higher, comparable to the other top fast food companies like MCD.
To the author: share repurchases had nothing to do with CMG's earnings beat. The share count was actually higher last quarter than in the year-ago quarter. Furthermore, Chipotle is on pace to produce about $500 million of FCF next year and has more than $1 billion in cash and investments sitting around. It could afford to buy back shares at a much faster rate, and it probably should.
Additionally, a 2.5% average increase in menu prices for the quarter is not much different than inflation. That rate of menu price inflation is probably sustainable in the long run. In any case, when more than 80% of the comp sales growth came from "organic" growth as you call it, it seems bizarre to point to the price increase as some big red flag.
FYI, I was very bearish on Chipotle not that long ago. I even shorted it and made some money in 2012. But the recent acceleration in comp sales growth completely changed my mind. I now think Chipotle is destined to be one of the few top fast food companies in the world, not just a niche burrito joint catering to yuppies.
How do you figure? Reed Hastings is so worried about customer backlash that he isn't willing to impose a 12.5% price increase on customers. Instead, they get at least 2 years at the same price, and then the opportunity to keep the same $7.99 price if they want by dropping down to 1-stream SD.
It doesn't seem very likely at all after going to the trouble of grandfathering users for 2 years that Netflix will be raising prices again in 2016. And if it raises prices again in 2017 or 2018, ongoing users will probably be grandfathered again at $8.99 (and the current going price in int'l markets). At best, maybe ARPU will be $120 in 2018, so you'd need 150 million subscribers.
Frankly, that's not a plausible number. 100 million seems very doable based on the recent sub growth pace, and 110 million seems possible but aggressive. Getting to 150 million by 2018 means adding more than 20 million int'l subs per year within a few years. There is nothing in Netflix's history to suggest that is possible.
Thanks for the thoughts everybody. I may just roll my options into a strike price that is a multiple of 7 next month rather than deal with these potential liquidity issues.
Anybody know what happens to existing options contracts? E.g. if you own a $500 call option today, would you have 7 $71.43 call options after the split? Would it even be possible to trade such things?
I agree that creating a set-top box doesn't make very much sense -- although perhaps Amazon Instant Video isn't available on every major smart TV?
However, I don't know where you're getting your information about content. Amazon has been pouring a steadily increasing amount of money into Prime Instant Video. Both of the shows you reference (Downton Abbey and Suits) are still on Prime Instant Video.
Perhaps you are only looking at the most recent season? Amazon makes new episodes available on a pay-per-view basis right after they air, but the Prime streaming rights generally start something like 6 months after the end of the season. I'm sure the latest season of Downton Abbey will be free for Prime subscribers sometime this summer.
I completely agree with the premise that Netflix's ultimate value turns on its ability to raise prices. However, the way that you are running the analysis skews the results in a few ways.
1) You are building in a full year of subscriber growth despite the price increase. Strong sub growth and a simultaneous price increase will obviously lead to massive margin expansion.
However, if you agree that the net result of a price increase will be stable subscriber numbers, then you should use the prior year's subscriber total when calculating revenue. In the hypothetical scenario that Netflix had raised prices at the beginning of this year, the proper sub base would be at most 33.4 million (the total number of free and paid subscribers at 12/31/13).
2) You are calculating revenue using the end of year subscriber total. However, that's just the number of paying subscribers on Dec. 31 -- in a 15% growth scenario, there are significantly fewer paying subscribers earlier in the year. This is inflating your revenue estimate by a few hundred million dollars. I also think Netflix's costs are growing faster than your model allows, but it's hard to know for sure.
3) Lastly, Netflix's costs won't stop growing just because subscriber growth starts to flatten out. Like Apple, Netflix is likely to see margins surge to a peak and then drop back to a more sustainable level -- at least domestically. (This may be offset by ongoing margin improvement outside the U.S.) Content costs are rising dramatically, and so I think Netflix needs to plan on increasing domestic content spend by at least 15% annually for the foreseeable future just to maintain the current quality of the content library, let alone improving it.
I didn't say it was a mistake. I said it was necessary to expand the network and win corporate travelers over time. However, it's very normal for new airline routes to take a year or two to reach profitability, and I don't think this one will be any different.
American's unit cost (CASM) was a little over $0.13 last year, excluding special items. For a long-haul transpacific flight like Hong Kong, the unit cost would be lower: maybe $0.11. (Obviously, that's just an estimate, but I think it's a reasonable one.) This summer, flights are selling for around $1600 roundtrip: that's a little under $0.10 in PRASM. Move forward to September and the fare is around $1200 roundtrip: down to 7.5 cents.
Obviously there are some people who buy refundable tickets, and some who will buy a business class or first class ticket. And there is some cargo revenue, but that's a small fraction of the total revenue for any flight. (Airline capacity between the U.S. and Asia has been rising rapidly in the last few years, which has pushed down cargo yields significantly. Just look at United's cargo revenue results in the last couple of years.) On the flip side, no route has a 100% load factor.
The bottom line is that I don't think American is defining success on these routes as having a 15% profit margin in the first year. If they can make some money in the summer and not lose too much more in the winter, while gaining some market share for U.S.-Asia travel, I think Doug Parker and company will be happy. I think your Wal-Mart toothpaste analogy might be closer to the truth than you suspect!
This idea that any Asian/US market will make money is completely false. It is incredibly expensive to operate these flights (Dallas to Hong Kong is more than 8,000 miles; this flight will likely use over $100K of fuel each way). US-China freight capacity has exploded in recent years and cargo yields have dropped significantly. Cargo is still a source of ancillary revenue, but these flights have to make their money with high yields.
I see the new Hong Kong and Shanghai flights as network driven -- to win corporate accounts, American needs to have more flights to China. In that sense, they should hopefully contribute to long-term profitability. In the near term, both flights are likely to lose money.
You're missing the point. Best Buy has a lot more risk than the market as a whole, yet it trades for essentially the same valuation. You're not getting compensated for the risk.
In late 2012, when Best Buy was trading for $11 or $12, investors were getting richly rewarded for taking on risk. At that point I was recommending the stock.
Now, even after the stock has corrected sharply lower, Best Buy still doesn't look especially enticing.
OK, so the Netflix CEO confirmed that Netflix will be paying more to Comcast than it was paying when sending data over third-party networks. However, he also said that the change does not impact Netflix's guidance for 400 basis points in domestic contribution margin expansion this year. To me that would suggest it will cost millions but not tens of millions of dollars.
Ink costs as much as it does because printing has always been a razor/razor blades business model, although HP has changed their strategy in most developing countries. In the U.S. and other developed markets, printers still get sold below cost based on the idea of an expected lifetime value. Consumer printers are not worth very much to HP or other OEMs because many people will just buy generic ink, refill cartridges, etc.
On the other hand, I do not think there is any evidence that printing is declining in the enterprise. Ink/toner volumes have been stable over the last several years even though printer sales were actually dropping a few years ago. Printer sales have now returned to growth. Why are people buying millions of printers if they aren't going to print?
The PC business has a negative cash conversion cycle and a very high ROIC for HP. I'm sorry that I don't have an exact figure. My sense from HP's comments is that it may have a higher ROIC than the corporate average simply because there is so little capital invested in PCs.
I take your point on operating leverage. We are comparing to different things. I think of automakers as companies with high operating leverage. A 20% gain or decline in auto sales is the difference between a 10% operating margin and a -5% operating margin. A 20% gain or decline in PC sales might be the difference between a 5% margin and a 2% margin.
I am sure that the PC business is holding back HP's valuation. But rather than selling it for pennies on the dollar or spinning it off with huge cost dis-synergies, I would prefer that HP take advantage of its high cash flow and absurdly low stock valuation to buy back shares aggressively. Unfortunately, it seems like the "once bitten twice shy" logic is haunting HP. A few years ago, the company was spending ~$10B a year buying stock at $40 or more while the business was falling apart. Now the business if healing and the stock price is lower, but the buyback pace has been quite slow.
There's a huge difference between printing and 3D printing. In any case, I'd be surprised if 3D printing goes as "mainstream" as investors seem to think will happen. It's great for some industrial applications and hobbyists, but I don't think there will ever be a time when 3D printers are common.
Samuel: Sales of printers were up last quarter, for the third straight quarter. A large portion of the printer value chain is in Japan, and the 25%-30% decline of the yen in the last year and a half has led to price deflation. Lower COGS and lower ASPs, but higher profits. If the exchange rate swung back to 77 yen/dollar, HP would probably be posting high single-digit revenue growth in printing, while operating margin would be plummeting. I'll take the revenue contraction and solid earnings growth every day of the week.
If by "people" you mean consumers, the answer is of course people are printing less. If you're looking at enterprises, I think the answer is different. There are businesses that have swapped out paper for tablets in some instances, but printing is not declining very rapidly in the enterprise.
There's not much operational leverage at all in HP's PC business. It's almost all contracted out so the costs are variable. The one area where operational leverage is significant is the enterprise services business, and that's where HP is cutting a lot of fat. If ES revenue stabilizes, the business will see significantly improved profitability in the next 1-2 years. If revenue keeps declining, then you are correct that profit will still be elusive in that business.
It's very clear that splitting HP would entail at least $1 billion of cost dis-synergies from lost purchasing power. From what I'm seeing, the turnaround is progressing steadily, and I do not think that separate management teams would be able to produce operational improvements that could offset those cost dis-synergies. Hence, better together.
JCP has $1.5 billion in the bank and burned nearly $3 billion last year. In a best case scenario, it will have $500 million in the bank going into the holiday season. More likely the company will need to sell off more assets to stay solvent through the holiday season.
Anybody who's paid attention to what's gone on at JCP in the last 2-3 years would recognize that the fact that management said the company has enough cash is meaningless. The last two years have been full of announcement about how JCP is "turning the corner", executives are "encouraged", "no need to raise cash", and all of these statements were eventually exposed as false hopes.
JCP's recent stock rally is analogous to Rite Aid's big rally in the last year and a half. When your market cap falls so low that your enterprise value is comprised almost entirely of debt, then small revisions to the probability that you'll go bankrupt can lead to huge swings in the stock price. It wouldn't surprise me whatsoever if JCP stock doubles this year. It also wouldn't surprise me if the company files Ch. 11.
As for BBY, it seems to me that 10% is an unusually low cost of equity. Isn't 12% a more normal figure? I suspect that would chop at least $5 off your target price. I don't particularly object to your FCF estimates, but I wouldn't buy BBY at $26 based on FCF growing 3% annually from current levels. Not much upside considering the risk that the business could collapse due to competition, which I think is a very real risk.
Not to be too harsh, but the stock market disagrees with your assessment of HP. You can interpret that how you want. My personal take is that the stock market can be very wrong for a long time... and that this is the case for AMZN (and was the case for HPQ a couple of years ago when the stock was down in the teens).
AMZN's FCF was a little over $2 billion last year -- a small fraction of HP's FCF. Plus, over half of Amazon's FCF was the result of stock-based compensation. If the employees were paid in cash based on the stock price and then the company issued new shares, it would have the same net effect without showing up in free cash flow.
Anyway, I digress. There's really no evidence that HP's printing business is in decline. There is some price deflation, but HP's COGS is declining faster than its revenue. Pretax income for that business was up solidly last year.
Obviously, people have different investing styles. You seem to go for growth at all costs. I don't think it's a problem that HP is not growing and not likely to grow much in the future. I'd prefer to have the company buy back 10% of its float every year and boost EPS that way rather than investing billions of dollars in long-shot R&D projects. When HP has tried to get in on the latest fad, that's where it has run into trouble.
It's worth noting that about 70% of HP's revenue comes from PCs, printing, and low-margin outsourcing services. None of these businesses should need very much R&D spending. If you separate out those businesses and look at the software and enterprise hardware business units separately, R&D is much higher as a percentage of revenue than the company average.
I wouldn't go quite that far. However, I would think it was a strategic mistake if Comcast gave Netflix better service at a lower price than what it was paying to third parties. My expectation is that Netflix would be paying perhaps $5-$10 million extra beyond what it would have paid to move the same video traffic over third-party networks. That seems like a reasonable price for Netflix to pay for significantly better service to about 1/4 of U.S. broadband subscribers. But that dollar range is just a guesstimate -- I don't have any inside sources!
TWC's value depends to a large extent on how fast its video subscriber base erodes. Comcast would be better off letting the deal get blocked if the alternative is to empower a disruptive competitor (Netflix) so that TWC loses video subs even faster. Just my two cents.