After recent years of a kind of corporate trauma without much precedent in the media business – complete with family feuds, CEO double-crosses and cratering results for its iconic TV and film properties – Viacom has gradually begun to hike the comeback trail. A new report from UBS analyst Doug Mitchelson argues the bull case for the company, especially in light of this week’s tentative carriage deal with Charter, the No. 2 U.S. cable operator.

“Most favored nations clauses with Charter’s larger peers (AT&T and Comcast) should not be triggered by this deal,” Mitchelson wrote, “which provides boundaries for the price cut that VIAB could have offered.” Without any carriage renewals scheduled over the next 18 months, the company will see less financial risk, he added.
One major benefit to Viacom from the Charter deal is that eight of its nine biggest networks – which account for 95% of the company’s affiliate revenue – will return to basic tiers on Spectrum. The operator’s decision to shift the networks to a premium tier had created tensions in advance of the deal. While concessions were made on both sides, not having networks on basic, higher-rate tiers could have been devastating to Viacom.
Ratings improvement at three key cable networks – MTV, Comedy Central and BET – are also improving the outlook, Mitchelson argued. “Management has been executing on its turnaround strategy, including improving ratings, upcoming cost realignment and delivering on affiliate renewals,” he wrote.
Citing these and other factors, Mitchelson reaffirmed his buy rating on Viacom, with a price target of $41, down from his previous target of $45. Shares are nowhere near that level. Midway through the trading session, they are up a fraction to $26.68 but well off their 52-week high of $46.72.