ViacomCBS (NASDAQ:VIAC) stock rounded off another quarter with healthy gains across its core segments.
It continues to be amongst the cream of the crop in the media industry. With its robust fundamentals, incredible cash balance and safe dividend, VIAC stock is a solid bet for income investors.
VIAC stock has been on a roller-coaster ride since the beginning of the year. It shot to highs of $101.9 in March but is trading at $40 and some change today.
Analyst estimates suggest that the stock is trading at a 29% discount to its mean price target.
Additionally, it is undervalued across all key price metrics in comparison to its peers. With an encouraging outlook, a dividend-yielding 2.4%, and minimal risk, the stock is bound to gain handsomely this year and beyond.
Moreover, its investments in its streaming portfolio and competencies have enabled it to navigate the cord-cutter movement effectively.
Second Quarter Results and VIAC
ViacomCBS recently released its second-quarter results, which show that its core business is generating value again. It boasts one of the biggest content libraries for various genres.
Its revenues rose to $6.56 billion in the period, representing a 7.9% increase from the prior year period. Additionally, advertising revenues shot up 24% on a year-over-year basis to $2.1 billion, while its affiliate revenues increased by 9%. At the same time, its GAAP earnings per share came in at an impressive $1.50.
Advertising revenue should rise in the upcoming quarters due to the broadcast of various sporting events. The re-opening of theatres and its mouth-watering lineup of blockbusters are also expected to play a huge role in its recovery.
My only concern with its earnings is its licensing business, which slowed down considerably during the second quarter. The lack of theatrical releases last year induced its business to drop by 36% on a year-over-year basis.
The licensing business is likely to slow down in the future due to the popularity of streaming services. As we discuss in the next section, ViacomCBS has done exceedingly well in curbing this threat by heavily investing in its streaming business.
Streaming Business Is Picking Up
ViacomCBS is well aware of the importance of OTT platforms to survive in the rapidly evolving media industry.
So far, it is doing exceedingly well with its OTT business, with its streaming advertising revenues rising 102% on a year-over-year basis.
Its OTT platforms comprising Pluto TV, Showtime OTT, and Paramount+ saw an increase of 6.5 million subscribers to a total of 42 million.
One of the key benefits of Paramount+ is that it can stream an array of sporting events, which has eluded many of the top streaming OTT platforms. ViacomCBS has exclusive broadcasting rights of the top sporting leagues. The platform will be launching in major European and Oceanian markets in 2022
It recently reached a deal with the makers of the hugely popular animated show, South Park, to make six more seasons and 14 new movies based on the show. Moreover, Paramount+ has other major titles, which will accelerate streaming growth.
Bottom Line on VIAC Stock
Shares of ViacomCBS have dwindled in value in the past year. However, its stellar second-quarter results indicate that it will be firing on all cylinders again.
It has done remarkably well to counter the surge in cord-cutting by focusing on its OTT services.
In the coming years, it could challenge the likes of Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) Prime in the battle for streaming supremacy. Hence, VIAC is an attractive media stock that is trading at a significant bargain at this point.
On the date of publication, Muslim Farooque did not have (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.
