ViacomCBS Is Still Losing the Streaming War After Merger

Since completing a merger late last year ViacomCBS (NASDAQ:VIAC, NASDAQ:VIACA) has become a battlefield stock that is losing the war.

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Shares are down 18% from the start of 2020, while the average S&P 500 stock is up 3.4%. The stock is considered undervalued as investors resist the siren call of amateur analysts insisting it’s a bargain.

One of the most attractive over-the-top plays with lots of upside, says one. The stock of 2020, says another. Scale where it counts, insists a third.

Professionals aren’t so sure. Credit Suisse dropped its rating on Viacom stock to “neutral” this month. Zacks notes it has entered oversold territory.

Head Says Yes, Gut Says No

Views differ between those who buy with their heads and those who buy based on gut instincts. In this case it’s the pros using their guts, and their guts have indigestion.

Seen from the head, you should buy now. ViacomCBS is expected to report $1.48 per share of earnings on revenue of $7.4 billion on Feb. 20. The stock sports a dividend of 22.5 cents per share, yielding 2.9%. The market capitalization is $21.4 billion against estimated 2019 revenue of $28.3 billion.

These numbers scream bargain.

The problem is that there’s little confidence the company has a place in the new streaming universe. CBS used to be the Tiffany of TV networks, back when there were three of them. Viacom was a cable powerhouse, back when that meant something.

In the cloud era, however, ViacomCBS is a minnow in a sea of sharks.

The other old networks are now owned by Disney (NYSE:DIS), worth $257 billion and Comcast (NASDAQ:CMCSA), worth $203 billion. Its main cable rival is now AT&T (NYSE:T), worth $275 billion. Netflix (NASDAQ:NFLX), worth $166 billion, has 150 million streaming customers, against 10 million for ViacomCBS’ Showtime and CBS All Access. Then there are the cloud giants, Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), both at $1 trillion.

The gut tells analysts sell, sell, sell.

Time to Sell?

ViacomCBS missed the cloud revolution as the two companies did their merger dance. It was a fight over the succession to Sumner Redstone the media treated like an HBO show. Daughter Shari Redstone, 65, is now in charge of the assets. CEO Bob Bakish is rebuilding the executive suite around George Cheeks, formerly of NBC Universal.

Bakish and Cheeks must renew their NFL contract, and create an affordable streaming line-up against all those cable and cloud giants. The analyst who dropped his rating admits the stock is cheap but expects cost-cutting to fail in the face of competition for talent.

ViacomCBS has an impressive array of assets. In addition to the TV network and cable channels like Comedy Central, Nickelodeon and MTV, with 22% of the TV audience, there’s the Paramount movie studio. There are international channels in Europe and Australia. There’s Simon & Schuster, the book publishers. There’s the Bellator martial arts shows. There are even some internet news assets. (I once blogged for CBS’ ZDNet service).

The Bottom Line on Viacom Stock

Redstone insists the company can stand on its own. Her National Amusements has complete control over what happens.

But Shari Redstone is 65, and the most logical path for this company is a sale. I wouldn’t buy the stock based on that speculation right now. But if it can’t get a new NFL deal, if cord-cutting increases, if its streaming services don’t scale, or if there’s a streaming shakeout, the handwriting will be on the wall.

Then it might be time for you to buy now in order to sell later. The most likely buyer, in my view, is a streaming competitor that I didn’t even mention. Apple (NASDAQ:AAPL) can pay cash.

Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL and AMZN.

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