Wall Street analyst Laura Martin of Needham Co. went so far as to say “Sell Netflix to buy ViacomCBS” after the marathon of presenting ViacomCBS’s plan for growth in the streaming arena on March 4 with the launch of Paramount Plus.
But Todd Juenger, of Sanford Bernstein Co., does not accept any of this, setting his target price for ViacomCBS shares at $ 23 for a stock that closed at $ 65.63 on Wednesday. ViacomCBS ‘longtime bear was not impressed by the company’s efforts to distinguish Paramount Plus (a new brand from CBS All Access) from the competition in the United States, emphasizing that it will deliver live news, sports, live feed from the CBS network live and “a mountain” of entertainment on demand.
“The offer of sports is very restricted for satisfy sports fans. The news belongs to the Internet. (International version of Paramount Plus) has no sports or news. In general entertainment is not differentiated, it is late and lacks the global scale of competitive offers ”, wrote Juenger.
He cited ViacomCBS ‘long-term debt and the promise of further erosion in its legacy TV operations as obstacles to establishing a major footprint in the next iteration of TV via direct-to-consumer streaming. ViacomCBS’s long-term debt is $ 19.7 billion, which is high for a company that reported adjusted operating income of $ 5.1 billion and free cash flow of $ 1.9 billion for the year 2020.
Other analysts had more contradictory reactions to the nearly three-and-a-half-hour presentation, led by ViacomCBS President-CEO Bob Bakish, in which ViacomCBS senior officials detailed plans to serve a wave of new content, many of which are rooted in the existing IP, in an effort to increase the company’s global direct customer subscriber base to 65 million to 75 million by 2024.
“We believe that Paramount Plus remains a true competitor in streaming wars, but it is still be determined whether he will become a winner, ”wrote JPMorgan analyst Alexia Quadrani. “In the short term, we would not be surprised to see the stock continues to be rewarded for its aggressive spending plans in a streaming strategy, although our enthusiasm is somewhat tempered by an already significant movement before this event for investors. “
As Quadrani noted, ViacomCBS shares had a great run this year, in part because investors were waiting for the presentation on February 24, which took place after the market closed.
On Thursday, ViacomCBS shares opened up nearly $ 2. But the stock failed to resist the broader significant market slowdown that saw the Dow close 560 points, while the NASDAQ, where ViacomCBS is listed, plummeted. 478.5 points on the day. ViacomCBS shares fell 4.7% at the close of trading on Thursday, to $ 62.50. That was a little more pronounced than the 2% to 3% falls recorded by the day for most of its media peers. ViacomCBS shares rose 68% year to date.
In his research note released on Thursday, Martin explained that he sees more advantages in ViacomCBS shares than in Netflix in the short term, because ViacomCBS has more room to grow. The shares suffered a major blow when Viacom and CBS Corp. were merged in December 2019. Martin said the company is undervalued, even with a market value of $ 39 billion (on Thursday). She argued that the company’s streaming business – mainly CBS All Access and Pluto TV – is already worth more than the company’s market value.
“We recommend buying (ViacomCBS) because we believe the value of its streaming assets is material and growing, and will become an increasing focus now that ViacomCBS will share its streaming revenue separately,” she wrote.
Michael Morris of Guggenheim Partners also took a vote of confidence, raising the target price of his shares to $ 74 from $ 50. He echoed the widespread sentiment among media business watchers that further consolidation is coming. for legacy media companies that are heavy but not as gigantic as Disney, Comcast, AT&T or Netflix.
“We see ViacomCBS, Discovery and Fox as generally similar and high-quality companies that face the same challenge of navigating the consumer shift from linear packages to streaming platforms,” wrote Morris. “We expect investors to consider long-term risks and opportunities for creating value in a similar way across the three businesses.”
The Paramount Plus content list, which includes a new reality show scheduled to open every month in 2021, was “very impressive,” wrote Dan Salmon, an analyst at BMO Capital Markets. But the media conglomerate’s focus on news and sports content “does not align with a long-term value pricing strategy,” he said.
“We are positive about reality, children, and the expanding universe of Star Trek as differentiators, still less about news and sports,” wrote Salmon.
In addition, the scope of ViacomCBS’s global streaming ambitions remains “uncertain at this stage,” wrote Salmon, noting that the company provided only limited details about its strategy for local language productions.
MoffettNathanson analyst Robert Fishman is also still in show me mode. The presentation’s focus on reinforcing Paramount Plus with new, high-powered library content raised questions about why Showtime will remain an independent premium content service instead of doubling under the new streamer.
“Although we believe ViacomCBS has enough exclusive content (script + sports) to continue growing Paramount Plus in the USA and benefits from the secular shift in advertising by switching to AVOD with Pluto, we’re still cautious about the impact of Showtime’s OTT growth on linear Showtime, as well as the expected continued decline of the linear core network for its remaining portfolio. “
Todd Spangler contributed to this report
(Pictured: ViacomCBS CEO Bob Bakish)