ViacomCBS (NASDAQ: VIAC) stunned the markets when the newly merged firm reported weak quarterly results. Massive write-downs and tepid revenue growth from the streaming media segments sent the stock lower by 17% after the earnings report.
Value investors who bought into the value stock story paid the price. The one big catalyst that will unlock the value in shares is Shari Redstone. And with the family having an 80% voting right, shareholders are powerless in saying or doing anything. The paltry dividend is not enough to offset the paper losses.
At below $30, the stock is in deep value territory that rumors will swirl on a buyout or asset sale. Hedge funds bought into the value stock story only to lose money. The streaming services for the existing content is a potential growth story only for the most hopeful. Netflix (NASDAQ: NFLX), Sony (NYSE:SNE), or Comcast (NASDAQ:CMCSA) may inquire about a partnership or may buy parts of ViacomCBS. Again, any deal depends on the family agreeing to the right price.
Chances are high that even with the slow revenue growth and high debt, the firm will want to acquire assets instead of selling itself. Pluto TV streaming service, which costs $340 million, is an example of such a strategy. This growth by acquisition strategy will prove damaging to the stock and shareholders. ViacomCBS is too late and too dated to compete with the big players.
VIAC stock is a buy, should shares fall to the mid-$25 - $26 range.
