Viacom shares plummet as investors express doubts about streaming performance

ViacomCBS shares continued to fall on Wednesday, falling more than 20% as investors continued to react to a new share sale and questioned the media company’s ability to successfully execute its streaming strategy.

The drop comes behind Tuesday’s stock slump, when the stock closed down 9%. Shares began to fall this week after the company announced it would raise $ 3 billion from new stock offers.

In a note on Wednesday, Bank of America Securities analysts said ViacomCBS’s move to streaming was the “right strategy” for the media company, “but difficult to execute”.

The company launched its streaming service Paramount + earlier this month. Media companies have been pouring funds into new content as the field becomes more crowded, and the new funds from the sale of shares could help Paramount + with its peers. But analysts have warned that it will be difficult to compete with “large-scale streaming players” like Netflix and Disney +.

In a note on Tuesday, analysts at AB Bernstein wrote that they supported the secondary increase, saying it could provide protection against a drop in ad revenue or a way to spend more money on streaming. But analysts reiterated that the shares were “significantly over-priced” and warned that the company’s legacy “insurmountable structural headwinds” and that it could “waste billions on streaming offers that we believe will have a hard time carrying their own weight”.

ViacomCBS was not the only new streaming player to fall on Wednesday. Discovery’s shares fell up to 10% after UBS downgraded its shares to sell. Analysts wrote that their emerging screaming service was “starting in a better position than its peers”, with a stronger international presence and fewer legacy licensing agreements (meaning less risk of cannibalizing existing revenue as it moves to streaming).

But the UBS note also warned: “We remain concerned with the final scalability of the service in relation to the decline in the linear business”.