ViacomCBS Sells Off After Mixed Quarter

ViacomCBS Inc. (VIAC) is trading lower by more than 11% in Tuesday’s pre-market after posting a Q4 2021 profit of $0.26 per-share, missing estimates by $0.19. Revenue beat expectations by more than $500 million, rising 16.4% year-over-year to $8.0 billion. Paramount+ and Showtime streaming services added 9.4 million subscribers, reaching a global total of 56 million. New subs beat 6.4 million estimates by a wide margin. The free Pluto service posted strong growth as well, adding 10 million new users.

Investments Overpower Revenue Growth

The cost to obtain subscribers rose, similar to headwinds faced by rivals Netflix Inc. (NFLX) and Walt Disney Co. (DIS), who are also chasing a dwindling pool of potential customers. The company failed to disclose bottom line results for its streaming business, leading analysts to conclude the divisions are still losing money. That isn’t good news because VIAC profits remain dependent on stagnating legacy media that includes Nickelodeon, MTV, and Comedy Central.

KeyBanc Capital Markets analyst Brandon Nispel upgraded the stock to ‘Sector Weight’ ahead of the report, simultaneously sounding the alarm about tough market conditions. As he notes “VIAC fundamentals going forward are poor and expectations are high for EBITDA/FCF, both of which are likely to decline in 2022 given ramping streaming investment. However, we worry that accelerating subscriber growth and breakdown of profitability between legacy Media and DTC could lead to improving sentiment and overenthusiasm could ensue à la 2021.”

Wall Street and Technical Outlook

Wall Street consensus stands at a modest ‘Hold’ rating, based upon 10 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 0 ‘Underweight’, and 3 ‘Sell’ recommendations. Price targets currently range from a low of $32 to a Street-high $67 while the stock is set to open Tuesday’s session on top of the low target. This dismal placement highlights investor dissatisfaction with ViacomCBS’s progress-to-date, fueled by the 69% decline since the stock topped out at 102 in March 2021.

ViacomCBS was created in December 2019 by the merger of Viacom and CBS, keeping the old CBS chart going forward. It rose more than 60 points into March 2021, and turned tail, crashing 60% in just four sessions. Aggressive sellers returned in October after six months of sideways action, breaking support in the upper 30s. A test at the 200-day moving average has failed twice, giving way to a selling spiral that could now break the 2021 lows in the upper 20s.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

What Does Russia’s Threat Really Mean for Markets?

Russian officials maintain they have no plans to invade and say they are seeking a diplomatic way forward. Western officials don’t fully believe Russia’s claims, pointing to the continued military buildup along Ukraine’s borders. Both sides accuse the other of waging propaganda campaigns and Ukraine itself has made conflicting claims about how high the threat level really is.

Many Russian experts say that Russia’s economy won’t support an invasion of Ukraine and believe that Russian President Vladimir Putin is just trying to squeeze concessions out of the West.

Still, just the possibility of Russia’s oil supplies being interrupted has sent crude oil prices over +$95 per barrel with some insiders warning that an escalation in the standoff could send futures prices soaring to +$150.

Keep in mind, many oil insiders believe crude prices could top $100 per barrel in the near-term even without an armed conflict in Ukraine due to a growing supply deficit. Higher oil prices complicate the inflation fight that the Federal Reserve is now trying to battle.

Federal Reserve policy

While higher oil prices exacerbate inflation, there is nothing that central bank policy can do to impact oil markets. So we have a situation of higher oil prices adding to already high inflation at the same time that the Federal Reserve is preparing to raise interest rates.

Most economists fear this is a recipe for slower economic growth, possibly even recession.

When the Fed said inflation was “transitory” back in the summer of 2020 I doubt they were forecasting “delta” the major second wave of the virus and or forecasting the third “omicron” wave of the virus. I also doubt they thought about Russia and China aggressively flexing their muscles or perhaps even working to pour gas on the inflationary fires that are currently burning.

Nonetheless, here we are with investors talking about perhaps the start of an extended bear market in stocks, i.e. in 2000 the S&P 500 was down -9%, in 2001 it was down by another -13%, and ended in 2002 by tumbling another -23%. I’m certainly not saying we are going to repeat the dot.com bubble bursting but there is a chance we could continue to make lower highs and lower lows until the market is more certain about Fed policy and their rate of change and more certain about some of the geopolitical jockeying that could keep inflation hotter than some bulls have been forecasting.

St. Louis Fed President James Bullard told CNBC yesterday that the Fed needs to accelerate its pace of rate increases and repeated that he would like the Fed to raise its policy rate by 100 basis points by July. Bullard said previously that he supports starting with a 50-basis point rate hike in March and would like to see the central bank begin reducing its balance sheet by the end of Q2.

It’s worth mentioning that the “minutes” for the Fed’s January meeting will be released tomorrow which is guaranteed to be the most hawkish narrative to come out of the central bank since the start of the pandemic. It’s not likely to provide much in the way of clues as to what the Fed’s next move might be but it could provide some indication as to how many members are firmly planted in the aggressive policy tightening camp.

Data to watch

Today, bulls are nervous that the Producer Price Index could further stoke inflation fears if the gauge comes in higher than the +9.2% year-over-year rate that Wall Street is expecting. The December read did show signs of price pressures starting to ease but most of that was credited to lower energy prices in early December, which as we know have only marched higher since. Also due out today is Empire State Manufacturing.

Earnings today include Airbnb, Glencore, Invitation Home, Marriott International, Novozymes, Restaurant Brands, Roblox, ViacomCBS, and Zoetis. For full disclosure I still own shares and continue to be a long-term investor in Airbnb, Roblox, and Zoetis.

For a look at all of today’s economic events, check out our economic calendar.

Preview: What to Expect From ViacomCBS’ Earnings on Tuesday

ViacomCBS Inc, an American diversified multinational mass media conglomerate, is expected to report its fourth-quarter earnings of $0.37 per share, which represents a year-over-year decline of over 60% from $1.04 per share seen in the same period a year ago.

The mass media company would post revenue growth of more than 9% to $7.51 billion from $6.87 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

ViacomCBS stock traded flat at $35.99 in pre-market trading on Monday. The stock rose more than 19% so far this year after slumping nearly 19% in 2021.

Analyst Comments

“We believe ViacomCBS can use its greater scale to secure continued distribution and avoid a major pricing reset or lost distribution. However, even in the context of healthier than expected distribution revenues, traditional TV ad exposure and the rising need for investment could pressure margins. We see significant opportunity for Paramount+ and Showtime OTT to scale and help mitigate pressures within the traditional media ecosystem, though there is limited visibility into long-term profitability,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

”Digital advertising through Pluto and AMS may be the answer to driving healthy ad growth but visibility is low. We continue to view the Paramount film studio as a scarce, valuable asset.”

ViacomCBS Stock Price Forecast

Six analysts who offered stock ratings for ViacomCBS in the last three months forecast the average price in 12 months of $42.00 with a high forecast of $53.00 and a low forecast of $32.00.

The average price target represents a 16.67% change from the last price of $36.00. Of those six analysts, three rated “Buy”, three rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $37 with a high of $52 under a bull scenario and $22 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the mass media company’s stock.

Several analysts have also updated their stock outlook. Deutsche Bank raised the target price to $43 from $39. Rosenblatt Securities cut the target price to $42 from $45. Citigroup lowered the price target to $52 from $54. BMO slashed the target price to $29 from $36.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator showing a mixed signal.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Shopify, Baidu, Walmart, Deere and DraftKings in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 14

Monday (February 14)

TICKER COMPANY EPS FORECAST
AAP Advance Auto Parts $1.93
ALX Alexander’s $4.29
AMKR Amkor Technology $0.65
ANET Arista Networks $0.6
SRC Spirit Realty Capital $0.81
VNO Vornado Realty Trust $0.76
WEBR Weber $-0.02

Tuesday (February 15)

TICKER COMPANY EPS FORECAST
ABNB Airbnb $0.05
AKAM Akamai Technologies $1.14
DVN Devon Energy $1.24
MAR Marriott International $1.04
RPRX Royalty Pharma $0.79
VIAC ViacomCBS $0.37
WFG West Fraser Timber $3.51

 

Wednesday (February 16)

IN THE SPOTLIGHT: SHOPIFY, BAIDU

SHOPIFY: Canadian multinational e-commerce company is expected to report its fourth-quarter earnings of $0.62 per share, which represents a year-over-year decline of over 46% from $1.15 per share seen in the same period a year ago. But the e-commerce software company would post revenue growth of over 37% to $1.34 billion.

According to Barron’s report, Gary Robinson, investment manager at Baillie Gifford said that Shopify is miles ahead of its competitors in helping merchants all over the world sell their items. He added that the company’s revenue could rise sharply in the next five years.

BAIDU: The Chinese tech giant is expected to report its fourth-quarter earnings of $1.89 per share, which represents a year-over-year decline of nearly 40% from $3.08 per share seen in the same period a year ago.

However, Baidu Inc, a leader in the Chinese search industry in terms of user market share, would post revenue growth of about 9% to $5.04 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We maintain a “Buy” rating for Baidu (BIDU) with a target price of RMB 165. Our target price is based on the forward P/E of 18.48x and forward P/S of 0.42x for FY22. Non-GAAP EPS of RMB 56.59 ($8.98) for FY22. This provides an upside potential of 15% over the CMP of RMB 143.80,” noted Shejal Ajmera is founder and head of research at CrispIdea.

“We decrease our estimate for revenue growth to 14.3% from 19% for FY21 due to China’s low GDP growth. We estimate revenue growth of 10% for FY22 and 12% for FY23. We estimate EPS of RMB 56.19 ($8.87) and RMB 56.59 ($8.93) for FY21 and FY22, respectively.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 16

TICKER COMPANY EPS FORECAST
AMAT Applied Materials $1.85
SAM Boston Beer $2.87
H Hyatt Hotels $-0.08
MGY Magnolia Oil & Gas $0.77
MRO Marathon Oil $0.52
NVDA Nvidia $1.0
TRIP TripAdvisor $-0.04

 

Thursday (February 17)

IN THE SPOTLIGHT: WALMART

Bentonville, Arkansas-based retailer Walmart is expected to report its fourth-quarter earnings of $1.49 per share, which represents year-over-year growth of over 7% from $1.39 per share seen in the same period a year ago.

The multinational retail corporation that operates a chain of hypermarkets would post revenue growth of nearly 1% to $150.91 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“Latest AlphaWise data shows Walmart+ membership continues to increase, with ~15m members total (~12% household penetration) & ~1m net members added in the past quarter. Overlap between Walmart+ & Prime remains high; we’ll monitor if this changes with a Prime fee hike coming,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect Walmart (WMT) to sustain recent momentum in its core business in F’22/F’23 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $170 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers as the market undergoes a mid-cycle transition.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 17

TICKER COMPANY EPS FORECAST
AN AutoNation $4.96
DBX Dropbox $0.2
ROKU Roku $0.01

 

Friday (February 18)

IN THE SPOTLIGHT: DEERE, DRAFTKINGS

DEERE: The world’s largest maker of farm equipment, is expected to report its fiscal first-quarter earnings of $2.28 per share, which represents a year-over-year decline of over 41% from $3.87 per share seen in the same period a year ago. The agricultural, construction and forestry equipment manufacturer would post revenue growth of about 0.5% to $8.09 billion.

“Higher input and freight costs to affect FY22 margins. We downgrade our rating to “Hold” from “Buy” for Deere & Co. and upgrade our TP to $406 for FY23. We derive TP based on non-GAAP EPS to $22.30 & $25.14 for FY22 & FY23, respectively and P/E of ~16.1x for FY23. This provides an upside potential of 8.6% from CMP of $373.79,” noted Shejal Ajmera, Head of Research at Crispidea.

“Following are the reasons for the above assumptions: 1) Strong demand in farm and construction equipment to aid topline; 2) Focus on automation to ensure long term growth and 3) Short term headwinds to affect profitability.”

DRAFTKINGS: The U.S.-focused gambling operator is expected to report its fourth-quarter loss of $0.78 per share, a dime greater than the loss of $0.68 it recorded in the same period a year ago. But the revenue would grow more than 36% to $439.5 million.

“We forecast legal US sports betting & iGaming to increase from <$1.5B in 2019 to $20.6B in 2025 as more states legalize and spend per capita rises. Forecast DKNG to maintain top tier share, 24% in OSB and 21% in iGaming in 2025. Investors question LT profits, but other developed markets have shown 25-30%+ profits for operators at maturity, esp. those with a customer acq. advantage similar to DKNG’s with its DFS database,” noted Thomas Allen, equity analyst at Morgan Stanley.

“Current valuation of 9x 2025e EBITDA does not reflect long-term margins or growth. Upside drivers include signs of profits in mature states, new product innovation and higher market share. Downside risks include higher losses, greater competition and lagging product innovation.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 18

TICKER COMPANY EPS FORECAST
ABR Arbor Realty Trust $0.39
B Barnes Group $0.49
BLMN Bloomin’ Brands $0.52
DE Deere & Co. $2.28

 

Stocks Retreat On Worries About Archegos Capital Default

Default Of Archegos Capital Puts Pressure On Bank Stocks

S&P 500 futures are losing ground in premarket trading as traders evaluate the consequences of the default of a hedge fund Archegos Capital, which put serious pressure on several stocks on Friday. Shares of Viacom finished the trading session down by 27%, while Discovery stock was also down by 27%.

Several banks have already warned that the fire-sale will trigger significant losses. Nomura Holdings stated that it could record a loss of as much as $2 billion, while Credit Suisse stated that its losses could be “highly significant”. Not surprisingly, both stocks are under strong pressure.

Shares of other financial companies are also losing ground as traders are worried that more firms were exposed to the sell-off. Big margin calls happen from time to time in the stock market, but S&P 500 is highly sensitive to such news right now as it is close to all-time highs.

Ever Given Is Partially Refloated

The huge container ship Ever Given, which blocked Suez Canal, was partially refloated, according to the recent reports. It remains to be seen when Suez Canal will be back to its usual operations, but it’s already clear that the impact from the blockage will be felt for the upcoming weeks.

Interestingly, WTI oil is moving higher despite the progress in Suez Canal and worries about the third wave of the virus. It looks like traders are focused on the upcoming OPEC+ meeting. The market expects that OPEC+ will keep current production cuts due to the negative developments on the coronavirus front, which is bullish for oil and oil-related equities.

Precious Metals Move Lower Despite Drop In Treasury Yields

Gold and silver are under pressure at the start of the week while Treasury yields move lower. Gold has made many attempts to settle above the 20 EMA at $1740 during recent trading sessions but failed to develop upside momentum, which is a bearish sign.

Shares of gold and silver miners moved higher on Friday, but selling pressure may intensify in case gold gains downside momentum and moves closer to the $1700 level.

For a look at all of today’s economic events, check out our economic calendar.

ViacomCBS Forecasts 70 Million Streaming Subscribers, $7 Billion Revenue by 2024

ViacomCBS Inc, an American diversified multinational mass media conglomerate, forecasts global streaming subscribers to reach 70 million with revenue of over $7 billion by 2024; however, it reported lower-than-expected quarterly revenue in the fourth quarter.

The mass media company said its revenue increased 3% to $6.87 billion in the quarter ended December 31, missing the market expectations of $6.89 billion. Net earnings attributable came in at $783 million, or $1.26 per share and excluding items the mass media company earned $1.04 per share, a little above Wall Street’s consensus estimates of $1.02 per share.

ViacomCBS posted an inline end to 2020 as fourth-quarter revenue and EBITDA met FactSet consensus expectations. The earnings were overshadowed by the Paramount+ investor day which featured some actual news along with the now de rigueur sizzle reel and a few unfortunate technical difficulties. The service appears to be CBS All Access on serious content steroids,” said Neil Macker, senior equity analyst at Morningstar.

“We think a combination of the live CBS feed, a news channel, live sports, a massive catalog, and a number of original series at either $5 or $10 per month will be appealing to many U.S. consumers, but the attractiveness to international viewers may depend on the strength of local language content. We are maintaining our narrow moat for Viacom CBS and expect to modestly raise our $57 fair value when we update our model.”

ViacomCBS said its global streaming subscribers grew to nearly 30 million, Pluto TV Global MAUs to 43 million and it rose to 19.2 million in the U.S., up 71% year-over-year, and Pluto TV domestic MAUs increased to 30.1 million.

The world’s leading producers of premium entertainment said its domestic streaming & digital video revenue growth accelerated to 72% year-over-year in the fourth quarter, driven by strong streaming subscription and streaming advertising revenue.

ViacomCBS shares, which slumped over 11% in 2020, surged over 75% to $65.60 so far this year. The stock fell about 1% to $65.0 in extended trading on Wednesday.

Executive Comments

“In Q4, despite the ongoing impacts of COVID-19, we finished the year with a strong advertising and affiliate results that demonstrate the strength of our core businesses and achieved incredible growth across our linked streaming ecosystem, reaching nearly 30 million global subscribers and over 43 million Pluto TV global MAUs,” said Bob Bakish, President & CEO

“At today’s streaming investor event, we look forward to showcasing our opportunity to expand our position and bring ViacomCBS content and brands to streaming audiences around the world.”

ViacomCBS Stock Price Forecast

Seventeen analysts who offered stock ratings for ViacomCBS in the last three months forecast the average price in 12 months of $44.64 with a high forecast of $60.00 and a low forecast of $29.00.

The average price target represents a -31.95% decrease from the last price of $65.60. From those 17 analysts, four rated “Buy”, seven rated “Hold” and six rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $55 with a high of $80 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the mass media company’s stock.

“Having now firmly planted its flag in streaming, ViacomCBS will need to execute on its growth strategy while managing its legacy assets. Its unique and broad content portfolio along with the secular growth in streaming are tailwinds, while it enters a crowded space with rising capital intensity,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. ViacomCBS had its price target boosted by equities research analysts at BMO Capital Markets to $60 from $27. The firm currently has a “market perform” rating on the stock. Moffett Nathanson increased their price objective to $50 from $26. Zacks Research set a $31 price objective on the stock. KeyCorp started and issued an “underweight” rating and a $30.

Analyst Comments

“We believe ViacomCBS can use its greater scale to secure continued distribution and avoid a major pricing reset or lost distribution. However, even in the context of healthier than expected distribution revenues, traditional TV ad exposure and the rising need for investment could pressure margins. We see significant opportunity for the CBS broadcast network to drive upside from distribution revenues, as it remains a relatively under-monetized asset in the media ecosystem,” Morgan Stanley’s Swinburne added.

“Digital advertising through Pluto and AMS may be the answer to driving healthy ad growth but visibility is low. We continue to view Paramount as a scarce, valuable asset that could generate significant strategic interest.”

Upside and Downside Risks

Risks to Upside: 1) favourable distribution renewals or sub-trends supporting affiliate rev growth acceleration, 2) improved ratings, 3) healthy DTC sub growth, 4) improved film profitability– highlighted by Morgan Stanley.

Risks to Downside: 1) unfavourable renewal or dropped carriage pressures affiliate rev growth, 2) macro trends or soft ratings trends weigh on ad growth, 3) DTC sub growth disappoints, 4) extended time frame for the film to recover.

Check out FX Empire’s earnings calendar

ViacomCBS Set to Enter Streaming Wars

ViacomCBS Inc. (VIAC) is trading higher on Thursday after a tier one analyst upgrade. The company, formed by the 2019 merger of Viacom and CBS, has been a solid performer since October, gaining more than 54% as investors reprice the entertainment powerhouse as a streaming service, following in the footsteps of Walt Disney Co (DIS) and other distributors entering that space in the last two years.

Launching New Streaming Service

VIAC is launching the Paramount+ streaming service in the United States, Latin America, and international markets on Mar. 4.  CBS All-Access, in service since October 2014, will be folded into the new offering, which will also feature more than 6,000 movies and 1,400 episodes from owned channels that include Showtime, MTV, Comedy Central, and Nickelodeon. The company still hasn’t announced monthly subscription prices.

Needham analyst Laura Martin raised her target from $36 to $55, noting “VIAC will be revalued upward as a streaming company in 2021, after the launch of Paramount+. We project VIAC will report $2.2B of streaming revenue in FY20, $3.1B in FY21, and $4.3B in FY22. Based on an average of NFLX and ROKU’s current EV/22E revenue multiple, VIAC’s streaming businesses would be valued at approximately $58B, which is greater than VIAC’s total EV today.”

Wall Street and Technical Outlook

Wall Street consensus is less enthusiastic, with a ‘Hold’ rating based upon 5 ‘Buy’ and 7 ‘Hold’ recommendations. Three analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $26 to Needham’s Street-high $55 while the stock will open Thursday’s session about $6 above the median $37.50 target. The average target has dropped more than 13% in the last quarter, reflecting continued skepticism.

The stock broke down from a 7-year double top pattern in the fourth quarter of 2019 when it sold off through the upper 30s, hitting an 11-year low during the 2020 pandemic decline.  Steady upside remounted resistance at the start of January but price action has now lifted into 50-month EMA resistance and a major Fibonacci retracement level. Given those obstacles, sidelined investors may wish to wait for a test of new support in the 30s before jumping on board.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

ViacomCBS Q3 Earnings Beat Estimates; Forecasts 19 Million Streaming Subscribers by End-2020

ViacomCBS Inc, an American diversified multinational mass media conglomerate, reported better-than-expected profit and revenue in the third quarter and forecasts streaming subscriptions to touch 19 million by end-2020.

The mass media company said revenue from streaming and digital video rose more than 55% to $636 million in the third quarter. However, ViacomCBS’ overall advertisement revenue plunged 6%, better than the 27% decline seen in the second quarter.

ViacomCBS’ total revenue slumped 9% to $6.12 billion, but that was higher than the market expectations of $5.94 billion. Excluding items, the mass media company earned 91 cents per share, above Wall Street estimates of 80 cents.

“ViacomCBS reported a strong third quarter as revenue and EBITDA beat FactSet consensus expectations. While the linear networks and studio were once again negatively impacted by the pandemic, the streaming services continue to benefit from the users staying at home. We are maintaining our narrow moat rating for ViacomCBS and our $57 fair value estimate,” said Neil Macker, senior equity analyst at Morningstar.

But on Friday, along with its peers, ViacomCBS shares fell 6.35% to $29.30; the stock is down about 30% so far this year.

ViacomCBS Stock Price Forecast

Twelve equity analysts forecast the average price in 12 months at $31.00 with a high forecast of $36.00 and a low forecast of $26.00. The average price target represents a 5.80% increase from the last price of $29.30. From those 12 analysts, five rated “Buy”, seven rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $32 with a high of $48 under a bull-case scenario and $15 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the mass media company’s stock. Barclays raised ViacomCBS from an equal weight rating to an overweight rating and boosted their price target for the company to $36 from $22.

Several other analysts have also recently commented on the stock. BidaskClub raised to a buy rating from a hold rating. Benchmark boosted their price target to $35 from $24. At last, Bank of America cut ViacomCBS to a neutral rating from a buy and set a $25 price target in July.

We think it is good to buy at the current level and target at least $35 as 100-day Moving Average and 100-200-day MACD Oscillator signal a buying opportunity.

Analyst Comments

“We believe ViacomCBS can use its greater scale to secure continued distribution and avoid a major pricing reset or lost distribution. However, even in the context of healthier than expected distribution revenues, traditional TV ad exposure and the rising need for investment could pressure margins. We see significant opportunity for the CBS broadcast network to drive upside from distribution revenues, as it remains a relatively under-monetized asset in the media ecosystem,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

“Digital advertising through Pluto and AMS may be the answer to driving healthy ad growth but visibility is low. We continue to view Paramount as a scarce, valuable asset that could generate significant strategic interest,” Swinburne added.

Upside and Downside Risks

Upside: 1) favourable distribution renewals or sub-trends supporting affiliate rev growth acceleration, 2) improved ratings, 3) healthy DTC sub growth, 4) improved film profitability – highlighted by Morgan Stanley.

Downside: 1) unfavourable renewal or dropped carriage pressures affiliate rev growth, 2) macro trends or soft rating trends weigh on ad growth, 3) DTC sub growth disappoints, 4) film underperformance pressures margins.

Check out FX Empire’s earnings calendar

ViacomCBS Posts Better-Than-Expected Q2 Revenue on Robust Streaming Demand; Target Price $35

ViacomCBS Inc, an American diversified multinational mass media conglomerate, reported a better-than-anticipated revenue and profit in the second quarter, largely due to robust growth in streaming amid the COVID-19 pandemic, sending its shares up over 5%.

The mass media company said its affiliate revenue increased 2%, reflecting growth in station affiliation and retransmission fees, as well as subscription streaming revenue, which more than offset declines in pay-TV subscribers. However, its advertising revenue declined 27% year-over-year, driven by the adverse effects of COVID-19 on global advertising demand.

ViacomCBS U.S. pay streaming subscribers reached 16.2 million, up 74% year-over-year. That help boost streaming and digital video revenue to $489 million, up 25% year-over-year, driven by 52% growth in streaming subscription revenue.

ViacomCBS’ revenue declined 12% to $6.28 billion in the second quarter but exceeded the forecast of $6.27 billion, according to Refinitiv. On an adjusted basis, the company earned $1.25 per share, beating Wall Street estimates of $0.93 per share, according to IBES data, reported by Reuters.

At the time of writing, ViacomCBS’ shares traded over 5% higher at $27.35, still down about 40% so far this year.

ViacomCBS stock forecast

Sixteen analysts forecast the average price in 12 months at $28.23 with a high forecast of $45.00 and a low forecast of $17.00. The average price target represents an 8.58% increase from the last price of $26.00. From those 16, eight analysts rated ‘Buy’, seven analysts rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $25 with a high of $42 under a bull scenario and $8 under the worst-case scenario. They currently have an equal weight rating on the stock.

Several other equity analysts have also updated their stock outlook. UBS Group lowered their target price on ViacomCBS to $16 from $31 and set a neutral rating. Needham & Company LLC boosted their target price to $30 from $20 and gave the company a buy rating.

We think it is good to buy at the current level and target at least $35 in the short-term as 100-day Moving Average and 100-200-day MACD Oscillator signal a buying opportunity.

Analyst comment

“We believe ViacomCBS can use its greater scale to secure continued distribution and avoid a major pricing reset or lost distribution. However, even in the context of healthier than expected distribution revenues, traditional TV ad exposure and the rising need for investment could pressure margins. We see significant opportunity for the CBS broadcast network to drive upside from distribution revenues, as it remains a relatively under-monetized asset in the media ecosystem,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

“Digital advertising through Pluto and AMS may be the answer to driving healthy ad growth but visibility is low. We continue to view Paramount as a scarce, valuable asset that could generate significant strategic interest,” the analyst added.

Upside and Downside risks

1) favourable distribution renewals or sub-trends supporting affiliate rev growth acceleration, 2) improved ratings, 3) healthy DTC sub growth, 4) improved film profitability, Morgan Stanley highlighted as upside risks to ViacomCBS.

1) unfavourable renewal or dropped carriage pressures affiliate rev growth, 2) macro trends or soft ratings trends weigh on ad growth, 3) DTC sub growth disappoints, 4) film underperformance pressures margins, were major downside risks.