ViacomCBS Upgraded to Outperform by Wolfe on Fundamentals

ViacomCBS benefits from a strong ad market and 'a seemingly reasonable consensus streaming subscriber target,' Wolfe wrote. Shares rose.
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ViacomCBS  (VIAB) - Get Report  (VIACA) - Get Report shares rose Wednesday after receiving an upgrade to outperform from peer perform from Wolfe Research analyst John Janedis.

Janedis sees the stock’s 56% decline in the Archegos Capital Management debacle as overdone. However, Janedis trimmed his price target to $70 from $80 to reflect recent market activity. Viacom and other stocks held in concentrated positions by Archegos tumbled at the end of March as the hedge fund reportedly failed to meet margin calls. 

Viacom traded up 2.66% to $45.53 in pre-market-trading Wednesday. It closed at $100.34 as recently as March 22. 

“With underlying ad trends solid, a seemingly reasonable consensus streaming sub target, the likelihood of a distribution partner(s) in the coming months, and implied streaming value of $5 billion at current levels, we find the risk/reward attractive,” Janedis wrote in a commentary.

“We assume total streaming subs to increase by 4.1 million (consensus: 4.5 million) to 34 million in Q1.”

Wolfe’s move represents at least the sixth upgrade for VIAC since the stock plunge, Bloomberg reported. Other upgrades came from BMO Capital Markets, Loop Capital Markets, Credit Suisse, Vertical Group and Gabelli.

ViacomCBS and other stocks linked to the unwinding of Archegos’ massive equity positions recovered Tuesday, after Credit Suisse CS reportedly sold additional blocks of stocks that totaled more than $2 billion.

Viacom originally slid after announcing March 22 that it will sell $3 billion in stock via two secondary offerings to boost funding for its streaming services.

Morningstar analyst Neil Macker puts fair value at $57 for Viacom. “ViacomCBS doesn’t necessarily need the cash, as it should generate more cash flow in 2021 than it pays out in dividends,” he wrote March 26 of the share offering.

“Management can use the proceeds to accelerate investment in its streaming efforts without worrying about near-term cash flow or debt maturities,” Macker noted.