When a family-run fund dangerously built a massive position in ViacomCBS (NASDAQ:VIAC), the stock topped $100. That trade fell apart when the fund failed to recognize that VIAC is just another highly indebted firm in need of cash.
VIAC’s stock sale triggered a stock drop and a margin call on the fund. The selling left the stock going nowhere. The company offers some hope. In Q1, the firm posted revenue growing by 14% Y/Y to $7.41 billion. It added six million global streaming subscribers and now has 36 million. The market is discarding VIAC stock: the stock at almost 1 times sales. It trades at 5 times free cash flow and is a GARP stock.
ViacomCBS suits the value investor. Still, after missing the stock’s lows last year, investors are better off looking elsewhere. The stock may move nowhere for months, given its heavy debt. Roku (NASDAQ:ROKU) and Disney (NYSE:DIS) are worth the premium because their streaming services have better diversification and appeal to a wider audience.
VIAC has a strong TV show line-up on CBS. But cable television is a slowing business that ViacomCBS’ growth prospects will wane. Plus, advertisers buy ad space on Facebook and Google, not on CBS.
VIAC stock is a buyout target at best. That, alone, is not enough to justify owning the stock at this time.
Investors should still avoid it for now.
