The firm also lowered its price target to $47 from $51 on shares of the New York-based entertainment company.
Telsey believes a Viacom credit downgrade is a real threat after Moody's lowered its rating outlook to "negative" from "stable" last month, the Fly reports.
The company's fundamentals continue to fall behind all other top U.S. entertainment companies and a credit downgrade is a real possibility, according to the firm.
Telsey also said a turnaround in fiscal 2017 is not likely.
Additionally, Viacom shares trade at a modest take-out premium and the firm sees a possible take-under as more likely, the Fly noted.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on the stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and notable return on equity.
But the team also finds weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and generally higher debt management risk.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: VIAB