If any company could use a firm, supporting hand, it’s Viacom (NASDAQ:VIA, NASDAQ:VIAB). Most businesses at some point undergo a severe competitive threat, but the owners of Viacom stock have faced an existential crisis for a long time.

Buying the shares of media entertainment companies, including Viacom stock, is fraught with risk. Levered to viewer trends and preferences, these companies’ metrics can change at a moment’s notice. Before content streaming dominated the industry, Viacom banked on its marquee brands such as BET, Comedy Central and MTV.

But once the cord-cutting phenomenon gained significant traction, the company and Viacom stock suddenly appeared ancient. Over the last five years, VIA stock has hemorrhaged slightly over 60% of its market value. However, management hopes that its recent announcement will substantively change the narrative.

In an all-cash deal, Viacom will acquire streaming service Pluto TV for $340 million. Pluto TV is an interesting animal. Rather than deploying a subscription model like Netflix (NASDAQ:NFLX) or acting as an add-on feature to a traditional cable service, the company instead has adopted a free, internet-based platform.

For viewers, the major caveat is advertisements. Still, that’s a small price to pay.

More importantly, the deal appears to be quite positive for Viacom stock. If VIA was to continue to focus on the increasingly antiquated-cable-TV model, its consumer base would eventually erode into nothing. Through this acquisition, Viacom improves its odds of remaining relevant for a sustained period of time.

In addition, the Pluto deal could enhance Viacom’s negotiating position with TV carriers. According to CNBC, Viacom will let TV carriers like Comcast (NASDAQ:CMCSA) and Charter Communications (NASDAQ:CHTR) offer Pluto to their broadband-only customers.

Viacom Stock Is a Bet on Relevant Content

Naturally, any investment in media content carries significant risk. As I mentioned above, changing consumer habits will hurt those who fail to stay relevant. At the same time, Viacom stock enjoys some noteworthy, and in some cases underappreciated, tailwinds.

First and foremost, VIA stock and its Class-B counterpart, VIAB stock, are incredibly cheap. Currently, the shares are trading for less than eight-times the company’s trailing and forward earnings. Its recent volatility enabled what turned out to be a great swing-trade. And despite the subsequent bounce-back of VIA stock, Viacom’s valuation is still quite low.

Another selling point is the company’s leadership team. Although it doesn’t have the best cards to play, it effectively utilizes the company’s assets. Last summer, Viacom entered a partnership with Netflix. Under the terms of the agreement, Viacom provided content to the disruptive streaming company.

Some analysts criticized the deal because Viacom is essentially giving up its crown jewels. However, I argued that it’s better to broadcast on a trending platform than to have exclusivity on a dying one. In the end, the company’s financial results will likely confirm that management made the right decision.

Meanwhile, the revenue of Viacom’s media networks division is holding its own, and its marquee programs resonate across demographic groups. For example, nearly 34% of MTV viewers are between 18 and 29 years old. But astoundingly, 31.3% of its viewers hail from the 30 to 49 year-old category.

Unlike for example Snap’s (NYSE:SNAP) user base, we don’t see a marked drop-off from Generation Z to older millennials. VIA is keeping its audience as they age, and that’s obviously beneficial for Viacom stock.

Beware of the Industry Risks Facing VIA Stock

If the content angle doesn’t convince you of the merits of Viacom stock, then a potential Viacom-CBS (NYSE:CBS) merger might. This on-again, off-again topic has emerged as a viable and realistic possibility. If so, the combined entity could give VIAB stock fresh legs.

However, I’m leery about the wave of corporate consolidation. Recent data suggests that high-profile deals in the media space haven’t produced good results. Simply put, industry giants are paying big bucks for diminishing returns.

And while Viacom has proven its relevancy to many viewers, the longer-term outlook of VIA stock and VIAB stock remains questionable. We can’t ignore the fact that we live in a new era of media. It’s not uncommon for a content producer on a (literal) shoestring budget to rake in bigger numbers than established competitors.

The Bottom Line on Viacom Stock

I like VIA stock as a speculative opportunity, and you should treat it as such. Going beyond that level carries risks that I’m not willing to entertain.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.