Despite Impressive Streaming Growth, ViacomCBS Remains A Tricky Bet

ViacomCBS stock ( NASDAQ: VIAC) lost more than 73% of its value –– dropping from $42 in January 2020 to $11 in March 2020. This was due to the Covid-19 breakout and the resultant lockdown, which led to expectations of financial slowdown and impacted the company’s standard company sectors like cable television and theater. Nevertheless, the multi-billion-dollar Fed stimulus offered a floor to the stock cost as it rebounded from April onward and presently stands at $26 per share. With the stock still 38% below its level at the start of 2020, is the market too conservative or is the rate increase warranted? We, in truth, think that the stock rate has actually increased a little beyond its near-term capacity and will likely decrease partially from here.

Where Is ViacomCBS’ Stock Headed In Next Few Months?

Trefis approximates ViacomCBS’ assessment to be around $25 per share, showing a slight decrease of a little less than 5% from its present level. The trigger is the current surge in COVID positive cases in the US and unpredictability with regard to the speed of lifting of lockdowns, and the fear of re-imposition of another lockdown, in which case the healing of the company’s leading and bottom line will be slower than what was earlier expected. Even according to the present estimates, the company’s total revenues are not anticipated to reach its 2019 levels even in the year 2021. The decline in the income projection is primarily due to the ongoing pandemic, leading to a complete stop in movie releases and cancellation/postponement of major sporting and home entertainment events striking the business’s profits from theatrical releases and advertising.

This appeared from the recently launched Q2 results of the business where the impact of the pandemic was palpable. ViacomCBS’ revenues decreased by 12% y-o-y to $6.275 billion in Q2 2020. This decline was primarily driven by marketing earnings which fell 27% while theatrical income was almost nil. The only saving grace for the business was the efficiency of its streaming business which taped healthy growth. Q2 2020 saw a 61% increase in Pluto TELEVISION’s customers while the customer base of other streaming platforms (CBS Access and Showtime) increased by a tremendous 74% y-o-y. This caused a digital video/streaming earnings to boost of approximately 25% y-o-y, led by 52% growth in streaming subscription earnings and robust development in Pluto TV marketing income. But the hit to its traditional company pulled the company’s overall income down. Additionally, success likewise deteriorated throughout the quarter, with the net income margin can be found in at 7.7% in Q2 2020 compared to 13.7% in Q2 2019.

ViacomCBS experienced a meaningful slowdown in its advertising and theater organisation. Though recently there have been indications of resuming of the economy and lifting of lockdowns which caused a rise in the stock rate, film production and theatrical releases will still take some more time to get back on track. Likewise, the current rise in COVID favorable cases in the United States could show to be an impediment in the path of the business’s healthy development, as the re-imposition of lockdowns will lead to an additional decline in the revenue growth outlook. Though the business is concentrating on streaming, another COVID wave and lockdown could put its main businesses at a meaningful threat.

For the complete year 2020, overall income is expected to be close to $26 billion and the margins are anticipated to drop to around 9%. As soon as lockdowns are raised, income is expected to rise to around $27.5 billion in FY2021, however, it is still anticipated to remain listed below its 2019 level of $27.8 billion. The margin might increase to a little over 10% in 2021 but would stay listed below its pre-COVID levels. With shares remaining stable, incomes per share are expected to drop more than 15% by 2021. In spite of a fall in income, the P/E multiple is not likely to fall. In reality, the numerous might increase by near to 10% from its current level of 5x to around 5.5 x. This is most likely to be the result of the business’s restored method to concentrate on its streaming organisation and with the vertical reporting an excellent performance, which is proving to be the buffer during the existing crisis. EPS of around $4.50 and P/S multiple of near to 5.5 x in 2021 recommends that ViacomCBS stock’s fair worth works to $25. Projection of lower-income and earnings and the expectation of a turn-around in the top and bottom lines taking longer than earlier anticipated could supply a potential downside of around 5% from its current level.

So, ViacomCBS might see a decrease from the existing level. However, want out-performance? Try thinking the % returns for our Pershing-inspired portfolio –– based on billionaire Expense Ackman’s firm Pershing Square –– vs. the S&P over the last 1 week, 1 month, 3 months, YTD or perhaps 3 years. Our portfolio integrates high development, quality, and danger mitigation requirements in a fascinating way.

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