Is Viacom CBS Worth a Buy Amid Acquisition Rumors?

ViacomCBS (NASDAQ:VIAC) has certainly been making headlines in 2021. The normally boring media stock got caught up in one of the biggest investment stories of the year — the failure of Archegos Capital Management. That storyline saw VIAC stock pile up a gain of 169% in the first month and a half of the year, only to plummet 55% in a matter of days. Now trading in $42 range, shares are up modestly from their 2021 open. However, that could change. Big movements among media companies as the video streaming wars intensify has ViacomCBS in the headlines again.

A ViacomCBS (VIAC, VIACA) out front of a corporate building in Times Square.

Source: Jer123 / Shutterstock.com

Bank of America issued a double upgrade for ViacomCBS, also raising its price target. The reason? The video streaming wars are entering a new phase of intensity and consolidation. Bank of America reasons that with its relatively low position among streaming companies and its sizeable content library, ViacomCBS is an acquisition target.

The Rapid Rise and Even Faster Fall of VIAC Stock

Between meme stocks, a zero-emission rush and re-opening of the economy, there has been no shortage of big stock stories in 2021. However, the dramatic rise and fall of VIAC stock was still big news.

After cruising through most of 2020 trading in the $20 to $24 band, VIAC began to gain steam last winter. It opened 2021 at over $30, then accelerated. The run culminated with a $100.34 close on March 22. Then the bottom fell out. Investors who had piled on saw their holdings plummet in value as VIAC shares dropped to the $45 level by the end of March. And they kept sliding.

What happened to cause such chaos? ViacomCBS got caught up in the mess created by Archegos Capital Management. The fund had snapped up $10 billion worth of VIAC shares, as part of its leveraged, $20 billion portfolio. When Archegos Capital Management collapsed — erasing $194 billion in market value in the aftermath — ViacomCBS shares were hammered.

ViacomCBS Gets a Double Upgrade

The good news for shareholders (at least those who hadn’t bought near the peak of the run) was that many analysts still had a positive view of VIAC stock. After all, this wasn’t a meme stock. The Archegos situation led to overvaluation, but also resulted in what many felt was an undervalued VIAC.

More recently, that line of reasoning became more popular after the blockbuster deal that saw AT&T (NYSE:T) and Discovery (NASDAQ:DISCA) announce they were joining forces for what would be the nation’s third-largest video streaming service. Suddenly, ViacomCBS had potential not just for its existing TV and streaming business, but also as an acquisition target.

In giving VIAC stock a double upgrade (from “Underperform” to “Buy”), with a $53 price target, Bank of America analyst Jessica Reif Ehrlich wrote:VIAC’s deep breadth of content (library of 140,000-plus TV episodes and 3,600-plus films across sports, movies, comedy, news, children, etc.) has value as an entire entity or if sold in individual parts.”

Bottom Line on ViacomCBS Stock

Bank of America is bullish about the VIAC stock, but that sentiment isn’t universal. The Wall Street Journal is tracking 31 investment analysts who offer coverage of ViacomCBS. Their ratings are all over the map (including four “Sell” recommendations), but the consensus among the group is “Hold.” Their average 12-month price target of $51.04 isn’t far off Bank of America’s target. That being said, there are other firms that make Bank of America look wary, including one with a $90 price target. 

That brings us back to the big question for potential investors. Is now the time to add VIAC stock to your portfolio? ViacomCBS isn’t going to catch the streaming video leaders. Ever. But as InvestorPlace contributor Joanna Makris points out, it doesn’t need to. CBS leads the pack in old-school TV viewing — which continues to bring in ad revenue and affiliate fees. The company’s Paramount+ streaming service boasts a deep content library. Between Paramount+ and Showtime, ViacomCBS counts 36 million global subscribers. That number has grown from 30 million at the end of February.

The company can continue to be a successful business without being top dog in the streaming world. And, should one of those streaming giants makes a bid for ViacomCBS, shareholders will make out nicely. Either way, there’s upside. VIAC stock currently holds a ‘B’ rating in Portfolio Grader, so it’s not perfect. However, at current levels, there’s definitely a case to be made for an investment in ViacomCBS. This is, without a doubt, one of the entertainment stocks that are worth your attention.

On the date of publication, Louis Navellier had a long position in DISCA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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