The multi-hour streaming presentation by ViacomCBS on Wednesday about its soon-to-be-rebranded streaming service Paramount+ has not proven to be a short-term tonic for the company’s stock price.
Shares dropped 5% today to close at $62.50, on above-average trading volume. The stock has surged more than 70% in 2021 to date, though, making a cooling-off period fairly inevitable. A quick upswing in Treasury yields also made for an ugly afternoon in the broader markets, with a tech selloff pushing the Nasdaq down 3.5%, the exchange’s worst day since last October. The S&P 500 and Dow Jones also finished in the red, though damage there wasn’t quite as bad.
Analyst reaction to the Paramount+ streaming extravaganza has been divided. A number of optimists have keyed in on the company’s rosy profit and subscriber forecasts, while skeptics say the effort could end up accelerating declines in traditional operations. Also, the unpersuaded say, the company was the last major media company to turn on the streaming jets, with Disney, WarnerMedia and NBCUniversal already well under way with their pursuits of Netflix.
“Management delivered an updated vision for a streaming future,” enthused Guggenheim Securities analyst Michael Morris in a note to clients. He reiterated his “buy” rating on the stock, boosting his 12-month price target to $74 from $50, buoyed by company projections of $7 billion in streaming revenue and 65 million to 75 million subscribers by 2024. “We see the company as well positioned among peers,” Morris added.
Laura Martin of Needham was just as upbeat, raising her target to $80 from $55 and even suggesting that clients sell stock in Netflix (of which she has been a longtime doubter) in order to buy ViacomCBS shares. ViacomCBS streaming assets alone, she asserted, are worth more than the company’s total market value as of today.
Todd Juenger of Bernstein Research, a longtime ViacomCBS bear, expressed a distinctly opposite view. “It’s a long fall down that mountain,” he snarked in the headline of his client note, zinging the central metaphor of the Paramount+ event and marketing campaign. “The Paramount+ consumer proposition is weak,” he wrote. “Sports offering is too narrow to satisfy sports fans. News belongs on the Internet. International has neither sports or news. General entertainment is non-differentiated, late, and lacks the global scale of competitive offerings. Post-pandemic, we expect a shakeout among streaming services at the consumer level. We’ll take the ‘under’ on the Paramount+ (and Showtime) guidance.”
Morgan Stanley’s Benjamin Swinburne reaffirmed his “market perform” (neutral) rating on ViacomCBS stock. He noted the company’s “unique strategy in streaming, across free, pay and premium and incorporating live and on-demand, TV and film, scripted and reality.” But execution will be key, he cautioned, and the market is crowded.
Robert Fishman of MoffettNathanson noted some upside surprises in the presentation — chief among them the company’s guidance for growth and revenue by 2024 — but also raised several looming questions. He noted the company’s plan to boost spending on streaming programming from $1 billion a year to $5 billion a year by 2024 (a tally that is presumed to include some sports licensing). But that higher spending level “includes internal licensing,” Fishman wrote. “In 2020, ViacomCBS generated $6 billion in content licensing. Given the company’s plans to self-license, it remains unclear what impact this will have to third-party licensing revenues.” In addition, he added, “It remains to be seen how much ViacomCBS is willing to risk its existing high-margin licensing business, especially with its current Showtime and key CBS programs already sold around the world.”
Fishman’s uncertainty about the prospects for ViacomCBS successfully pivoting to streaming was encapsulated by the title of his note: “Mission Impossible?”
MoffettNathanson previously has endorsed the shift toward streaming given the challenges in other business segments. “We previously did not forecast that streaming would become big enough to
return ViacomCBS on a path to growth within the next five years,” Fishman wrote. However, we still need to work on updating our projections, including factoring in the company’s updated disclosure, as well as digesting all of these new moving pieces in our model. So far, it isn’t clear to us that any of the new takeaways from the Streaming Event will change our opinion.”
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