Company Name: ViacomCBS
Current Price: $27,32
Target Price: $31
Projected Yield: 13.50%
Time Line: Until October 20, 2020
A large US based media conglomerate. Viacom owns such famous streaming brands and studios as Showtime, CBS All Access, Pluto TV, Paramount Studios, MTV channels, Comedy Central, and others.
What's the Idea?
Capitalize on stocks that are currently undervalued and may grow against the backdrop of the future development of streaming services and the sale of non-core assets.
Buy ViacomCBS Shares >>
Why Trade ViacomCBS?
Reason 1: Launch of a new international streaming service
ViacomCBS announced in July that it would launch a new international streaming service based on its existing CBS All Access. The company plans to add TV shows by Viacom cable networks. The launch is planned for early 2021, with a priority at the initial stage towards such developed markets as North America, Australia, and Europe.
The service is planned to be positioned as premium. According to the management, the viewers will have access to a wide library of their own entertainment content, as well as sports broadcasts. The subscription price will remain unchanged. Content diversification may become a strong competitive advantage, leading to an increase in audience and revenue growth.
Reason 2: Sales of non-core assets
The company plans to sell non-core assets, which may lead to an increase in price. The Wall Street Journal reported that ViacomCBS was in talks to sell CNET news outlet for $500 million. The company also plans to sell its former Manhattan based headquarters ($800 million) and the Simon & Schuster book publishing house ($1.20 billion). In case these deals are successful, ViacomCBS may receive additionally $2 to 2.50 billion, which will be used for further development.
Reason 3: Financial results for the last quarter exceeding expectations
The negative impact of the pandemic on advertising revenues has led to a decline in revenue for the last quarter by 12%, to $6.275 billion. This is still better than the $6.181 billion forecast. Advertising revenues fell by 27% to $1.934 billion. The movie distribution was also affected, the sales of which fell from $152 million to $3 million.
The overall revenue, however, was higher than expected due to the growth in CBS All Access and Showtime OTT streaming service subscriptions. CBS All Access and Showtime OTT US audience increased by 74% YoY to 16.20 million. The growth of subscriber numbers in Q2 2020 alone, compared to Q1, amounted to 2.70 million. The free service Pluto TV is also popular: it showed an audience growth in the last quarter from 24.20 million to 26.50 million. The streaming earnings grew by 25% to $489 million in the meantime, which included ads on Pluto-TV.
Reason 4: Stock being undervalued
ViacomCBS is currently trading at 6.8x EV/EBITDA, which is below the industry average of 9.4x. In terms of the profit/earnings (PE) ratio, the company is trading at a discount relative to competitors. ViacomCBS has a PE of 6.10, with an industry average of 17.60. Therefore, the company's stock is definitely undervalued.
How to Use the Investment Idea
- Buy ViacomCBS shares at the current price.
- Allocate no more than 3% to 4% of your midterm transaction budget.
- Sell the stock when the price is at $31 per share, which can be easily done in a couple of clicks with your member area.
How to Buy ViacomCBS Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type VIAC.US (ViacomCBS ticker in the NASDAQ) in the search box, and select VIACOMCBS INC. in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that shows up, type VIAC.US (ViacomCBS ticker in the NASDAQ) and select VIACOMCBS INC. in the search results. You will then see ViacomCBS stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy ViacomCBS Shares: Don't Miss the Growth of the Streaming Services!
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