Viacom (VIAB) has posted some upward momentum over the last few days, but Viacom stock has still lost 4% year-to-date and 16% over the last 12 months.
The media world is in a bit of a frenzy of late, resulting in a mixed bag for stocks. CBS (CBS) has fared just about the same as Viacom during the aforementioned time periods, for example.
On the flip side, some of the biggest media players got good news last week, with a judicial green light on consolidation.
Recently, a judge allowed AT&T’s (T) $80 billion takeover of Time Warner to proceed.
Also, Comcast (CMCSA) one-upped Disney’s (DIS) bid for 21st Center Fox offering $65 billion for it, with Disney counter-offering $71 billion soon after.
The news had some speculating that a merger could be in the cards for Viacom, which is one of six companies owning 90% of media.
Consolidation tends to breed consolidation. As other media fish get bigger, companies must follow suit in order to compete. Still, that doesn’t make Viacom stock a buy.
Viacom owns some household names, including Paramount Motion Pictures (which made Transformers, Shrek, Iron Man, and more), MTV, VH1, BET and Comedy Central.
CBS and Viacom were previously in merger talks, though the former has resisted pressure from their shared controlling shareholder to move forward. To add a twist, Verizon (VZ) recently expressed interest in buying CBS as well.
In the meantime, Viacom is making others moves to stay alive, like inking a deal with Netflix (NFLX), as more people opt for streaming.
The question for investors, though, is whether Viacom stock is a worthwhile value play. The deal with Netflix is proof of an entertainment mega-trend that’s hardly blowing wind at Viacom’s back.
And despite the recent bump, the stock has overall been beaten down, not just in the last year, but in the last five years.
Right now, Viacom sports a forward P/E under 7, which is half of the long-term growth of 15% that’s on tap for the stock. Its forward dividend yield is 2.26% thanks to the downward slide.
But that dividend has only been in place since September of last year and has held steady at 20 cents per share in its short tenure.
There’s a good bit of skepticism around Viacom stock, too, with 22% of the float is held short. The four analysts with eyes on Viacom have rated it “underperform” as well.
I’m skeptical, too. That earnings growth is far from organic and Viacom’s fundamentals haven’t shown any substantial improvement.
The media industry is generating a lot of headlines right now, but that’s hardly the same thing as a buy signal.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
