ViacomCBS Inc. (VIAC) is trading higher on Thursday after a tier one analyst upgrade. The company, formed by the 2019 merger of Viacom and CBS, has been a solid performer since October, gaining more than 54% as investors reprice the entertainment powerhouse as a streaming service, following in the footsteps of Walt Disney Co (DIS) and other distributors entering that space in the last two years.
Launching New Streaming Service
VIAC is launching the Paramount+ streaming service in the United States, Latin America, and international markets on Mar. 4. CBS All-Access, in service since October 2014, will be folded into the new offering, which will also feature more than 6,000 movies and 1,400 episodes from owned channels that include Showtime, MTV, Comedy Central, and Nickelodeon. The company still hasn’t announced monthly subscription prices.
Needham analyst Laura Martin raised her target from $36 to $55, noting “VIAC will be revalued upward as a streaming company in 2021, after the launch of Paramount+. We project VIAC will report $2.2B of streaming revenue in FY20, $3.1B in FY21, and $4.3B in FY22. Based on an average of NFLX and ROKU’s current EV/22E revenue multiple, VIAC’s streaming businesses would be valued at approximately $58B, which is greater than VIAC’s total EV today.”
Wall Street and Technical Outlook
Wall Street consensus is less enthusiastic, with a ‘Hold’ rating based upon 5 ‘Buy’ and 7 ‘Hold’ recommendations. Three analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $26 to Needham’s Street-high $55 while the stock will open Thursday’s session about $6 above the median $37.50 target. The average target has dropped more than 13% in the last quarter, reflecting continued skepticism.
The stock broke down from a 7-year double top pattern in the fourth quarter of 2019 when it sold off through the upper 30s, hitting an 11-year low during the 2020 pandemic decline. Steady upside remounted resistance at the start of January but price action has now lifted into 50-month EMA resistance and a major Fibonacci retracement level. Given those obstacles, sidelined investors may wish to wait for a test of new support in the 30s before jumping on board.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire