ViacomCBS Inc, an American diversified multinational mass media conglomerate, forecasts global streaming subscribers to reach 70 million with revenue of over $7 billion by 2024; however, it reported lower-than-expected quarterly revenue in the fourth quarter.
The mass media company said its revenue increased 3% to $6.87 billion in the quarter ended December 31, missing the market expectations of $6.89 billion. Net earnings attributable came in at $783 million, or $1.26 per share and excluding items the mass media company earned $1.04 per share, a little above Wall Street’s consensus estimates of $1.02 per share.
“ViacomCBS posted an inline end to 2020 as fourth-quarter revenue and EBITDA met FactSet consensus expectations. The earnings were overshadowed by the Paramount+ investor day which featured some actual news along with the now de rigueur sizzle reel and a few unfortunate technical difficulties. The service appears to be CBS All Access on serious content steroids,” said Neil Macker, senior equity analyst at Morningstar.
“We think a combination of the live CBS feed, a news channel, live sports, a massive catalog, and a number of original series at either $5 or $10 per month will be appealing to many U.S. consumers, but the attractiveness to international viewers may depend on the strength of local language content. We are maintaining our narrow moat for Viacom CBS and expect to modestly raise our $57 fair value when we update our model.”
ViacomCBS said its global streaming subscribers grew to nearly 30 million, Pluto TV Global MAUs to 43 million and it rose to 19.2 million in the U.S., up 71% year-over-year, and Pluto TV domestic MAUs increased to 30.1 million.
The world’s leading producers of premium entertainment said its domestic streaming & digital video revenue growth accelerated to 72% year-over-year in the fourth quarter, driven by strong streaming subscription and streaming advertising revenue.
ViacomCBS shares, which slumped over 11% in 2020, surged over 75% to $65.60 so far this year. The stock fell about 1% to $65.0 in extended trading on Wednesday.
“In Q4, despite the ongoing impacts of COVID-19, we finished the year with a strong advertising and affiliate results that demonstrate the strength of our core businesses and achieved incredible growth across our linked streaming ecosystem, reaching nearly 30 million global subscribers and over 43 million Pluto TV global MAUs,” said Bob Bakish, President & CEO
“At today’s streaming investor event, we look forward to showcasing our opportunity to expand our position and bring ViacomCBS content and brands to streaming audiences around the world.”
ViacomCBS Stock Price Forecast
Seventeen analysts who offered stock ratings for ViacomCBS in the last three months forecast the average price in 12 months of $44.64 with a high forecast of $60.00 and a low forecast of $29.00.
The average price target represents a -31.95% decrease from the last price of $65.60. From those 17 analysts, four rated “Buy”, seven rated “Hold” and six rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $55 with a high of $80 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the mass media company’s stock.
“Having now firmly planted its flag in streaming, ViacomCBS will need to execute on its growth strategy while managing its legacy assets. Its unique and broad content portfolio along with the secular growth in streaming are tailwinds, while it enters a crowded space with rising capital intensity,” said Benjamin Swinburne, equity analyst at Morgan Stanley.
Several other analysts have also updated their stock outlook. ViacomCBS had its price target boosted by equities research analysts at BMO Capital Markets to $60 from $27. The firm currently has a “market perform” rating on the stock. Moffett Nathanson increased their price objective to $50 from $26. Zacks Research set a $31 price objective on the stock. KeyCorp started and issued an “underweight” rating and a $30.
“We believe ViacomCBS can use its greater scale to secure continued distribution and avoid a major pricing reset or lost distribution. However, even in the context of healthier than expected distribution revenues, traditional TV ad exposure and the rising need for investment could pressure margins. We see significant opportunity for the CBS broadcast network to drive upside from distribution revenues, as it remains a relatively under-monetized asset in the media ecosystem,” Morgan Stanley’s Swinburne added.
“Digital advertising through Pluto and AMS may be the answer to driving healthy ad growth but visibility is low. We continue to view Paramount as a scarce, valuable asset that could generate significant strategic interest.”
Upside and Downside Risks
Risks to Upside: 1) favourable distribution renewals or sub-trends supporting affiliate rev growth acceleration, 2) improved ratings, 3) healthy DTC sub growth, 4) improved film profitability– highlighted by Morgan Stanley.
Risks to Downside: 1) unfavourable renewal or dropped carriage pressures affiliate rev growth, 2) macro trends or soft ratings trends weigh on ad growth, 3) DTC sub growth disappoints, 4) extended time frame for the film to recover.
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This article was originally posted on FX Empire