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Wall Street analyst Laura Martin of Needham Co. went so far as to say, “Sell Netflix to buy ViacomCBS” after Wednesday’s marathon presentation of ViacomCBS ‘streaming growth plan with the launch of Paramount Plus on March 4. .
But Sanford Bernstein Co.’s Todd Juenger has none of it, setting his price target on ViacomCBS shares at $ 23 for a stock that closed at $ 65.63 on Wednesday. The longtime ViacomCBS bear was not impressed with the company’s efforts to distinguish Paramount Plus (a new brand of CBS All Access) from the competition in the United States by pointing out that it will broadcast news live, sports, linear CBS live stream and “a mountain” of on-demand entertainment.
“The sports offer is too limited for satisfy sports fans. News belongs to the Internet. (The international version of Paramount Plus) has no sports or news. General the entertainment is undifferentiated, late and lacks globally competitive offerings, ”Juenger wrote.
He cited ViacomCBS’s long-term indebtedness and the promise of further erosion of its legacy TV business as obstacles to establishing a large footprint in the next iteration of TV via direct-to-consumer streaming. . ViacomCBS’s long-term debt stands at $ 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 mixed reactions to the nearly three-and-a-half-hour presentation, led by ViacomCBS Chairman and CEO Bob Bakish, in which ViacomCBS senior executives detailed plans to serve a wave of new content, much of it anchored in existing intellectual property, with the goal of growing the company’s global direct-to-consumer subscriber base to 65 million to 75 million by 2024.
“We think Paramount Plus remains a real contender in the streaming wars, but it is still be determined if he becomes a winner, ”wrote Alexia Quadrani, analyst at JPMorgan. “In the short term, we wouldn’t be surprised to see the title continues to be rewarded for its aggressive spending plans in a streaming strategy, although our enthusiasm is somewhat tempered by a a significant step forward before this event for investors. “
As Quadrani noted, shares of ViacomCBS have seen a strong run this year, in part because investors were waiting for the February 24 presentation, which took place after the market closed.
Shares of ViacomCBS opened as high as nearly $ 2 on Thursday. But the stock could not resist the significant market decline which saw the Dow close 560 points while the NASDAQ, where ViacomCBS is listed, fell 478.5 points for the day. Shares of ViacomCBS were down 4.7% when trading closed Thursday at $ 62.50. It was a bit steeper than the 2% to 3% drops recorded for the day by most of his media peers. Shares of ViacomCBS are up 68% year-to-date.
In her research note released Thursday, Martin explained that she sees more benefit in ViacomCBS stocks than in Netflix in the short term, as ViacomCBS has more leeway to grow. The action was a big hit when Viacom and CBS Corp. were united in a merger in December 2019. Martin claimed the company was undervalued even at a market cap of $ 39 billion (Thursday). She argued that the company’s streaming business – primarily CBS All Access and Pluto TV – is already worth more than the company’s market capitalization.
“We recommend purchasing (ViacomCBS) because we believe the value of its streaming assets is large and growing, and will become a growing priority now that ViacomCBS will allocate its streaming revenue separately,” she wrote.
Michael Morris of Guggenheim Partners also gave a vote of confidence, raising his target share price to $ 74 from $ 50. He echoed the widespread sentiment among media industry watchers that further consolidation is coming for traditional media companies that have weight, but are not as gigantic as Disney, Comcast, AT&T or Netflix.
“We see ViacomCBS, Discovery and Fox as generally similar, high-quality companies that face the same challenge of moving the consumer from linear bundles to streaming platforms,” Morris wrote. “We expect investors to broadly consider long-term risks and opportunities for value creation in the same way across all three businesses.”
The Paramount Plus content list, which includes a new reality TV series slated to premiere each month in 2021, was “very impressive,” wrote BMO Capital Markets analyst Dan Salmon. But the emphasis placed by the media conglomerate on news and sports content “does not correspond to a long-term promotion strategy,” he said.
“We’re positive about reality, kids, and the expanding Star Trek universe as a differentiator, minus the news and sports,” Salmon wrote.
Additionally, the scope of ViacomCBS ‘global streaming ambitions remains “uncertain at this point,” wrote Salmon, noting that the company has provided only limited details on its strategy for local language productions.
MoffettNathanson analyst Robert Fishman is also still in show-me mode. The presentation’s focus on bolstering Paramount Plus with new and high-powered library content raised questions about why Showtime will remain a stand-alone premium content service rather than fall back under the new streamer.
“While we believe that ViacomCBS has enough unique content (scripted + sports) to continue to grow Paramount Plus in the US and benefit from the age-old shift from advertising to AVOD with Pluto, we remain cautious about the impact of Showtime OTT’s growth on Showtime Linear as well as the expected continuous basic linear network decreases for its remaining portfolio. “
Todd Spangler contributed to this report
(Pictured: Bob Bakish, CEO of ViacomCBS)
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