ViacomCBS (VIAC) is one of the top players in the media and entertainment space. It operates through its CBS, Showtime Networks, Nickelodeon and MTV brands, among others. The stock has rallied 159.7% so far this year to close yesterday’s trading session at $96.76. However, it is currently trading 5.1% below its 52-week high of $101.97, which it hit on March 15.

Over the past few years, VIAC has focused mainly on delivering premium content to its audiences worldwide via television or cable networks.  It launched subscription streaming service Paramount Plus on March 4 to capitalize on a growing demand for streaming services. But it is expected to face intense competition from top players in this space. So, we think its near-term prospects are uncertain.

Here are the factors that we think could influence VIAC’s performance in the coming months:

Favorable Recent Developments

The National Football League (NFL) has signed long-term distribution deals with several major streaming services providers including VIAC. The new agreements begin with the 2023 season and run through the 2033 season. VIAC’s Nickelodeon received the go ahead  on March 19 for its two new creator-driven 2D-animated series — ZJ Sparkleton (working title) and The Hamster Show (working title). Nickelodeon Studios has also started production on a new original series for Paramount Plus based on the hit sitcom iCarly. It is expected to be launched this summer.

Robust Financials

VIAC’s global streaming and digital video revenue increased more than 71% year-over-year to $888 million for the fourth quarter ended December 31, 2020. This  was driven primarily by a 74% year-over-year increase in streaming subscription revenue and 69% rise in streaming advertising revenue. Also, the company’s non-GAAP EPS came was  $1.04 for the quarter, up 14.3% sequentially. In fact, VIAC has surpassed  consensus EPS estimates in each of the trailing four quarters.

Stiff Competition

VIAC, which traditionally has focused on providing cable services, launched Paramount Plus streaming services on March 4. However, it is expected to face stiff  competition from industry leaders such as Netflix, Inc. (NFLX) and Amazon.com, Inc.’s (AMZN) Prime Video that  already dominate the market with their original shows and  other offerings. Furthermore,, VIAC will also face competition from The Walt Disney Company’s (DIS) Disney + and Hulu and Comcast Corporation’s (CMCSA) Peacock services, to name a few more in the crowded field. Consensus Price Target Indicates Downside

Wall Street analysts expect VIAC to hit $45.02 in the near term, which indicates a potential decline of 32.9%.

POWR Ratings Don’t Indicate Enough Upside

VIAC has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. VIAC has a C grade  for Value also. This is consistent with its forward price/sales of 2.18x, which is slightly higher than the industry average 1.99x.

The stock also has a C grade  for Quality, which is in sync with its trailing-12-months’ gross profit margin of 40.7%, which is lower than the industry average  51.1%.

Click here to access VIAC’s ratings for Growth, Momentum, Stability and Sentiment.

VIAC is ranked #9 of 18 stocks in the Entertainment – Media Producers industry.

Better than VIAC: Click here to access five top-rated stocks in the same industry.

Bottom Line

VIAC witnessed a sharp decline in its revenue amid the COVID-19 pandemic as advertisers reduced their television spending and sporting events were cancelled. However, even though the company has managed to recover from its pandemic lows, it still faces intense competition from industry leaders. So, we think it  wise to wait and see if VIAC’s Paramount Plus can  gain significant market share in the streaming space.

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VIAC shares were trading at $98.01 per share on Friday afternoon, up $1.25 (+1.29%). Year-to-date, VIAC has gained 163.78%, versus a 4.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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