ViacomCBS (NASDAQ:VIAC) has been a costly disappointment for some investors in 2021. Enthusiasm over the company’s newly-announced streaming plans paired with Reddit-fueled retail investors drove VIAC stock past $100 three weeks into March. That was a 174% gain in under four months.
A catastrophic crash then saw shares lose half their value in under a week. VIAC stock stabilized around the $40 level, where it’s remained since April. I can understand why those who were burned when they bought shares in the first three months of the year would be gun-shy about ViacomCBS.
However, the March bloodbath that knocked shares down to Earth offers an opening. Despite the crash of its stock, ViacomCBS is no struggling company. Its latest quarterly earnings report showed strength and growth — especially when it comes to its video streaming services and all-important advertising revenue.
The stock earns a “B” rating in Portfolio Grader and a consensus “buy” rating from the analysts polled by CNN Business. Here’s why you should shake off the memories of March and consider adding VIAC stock to your portfolio.
VIAC Stock’s Rough Rise and Fall Shouldn’t Repeat
It’s easy to be skeptical of a stock that puts on the kind of show that ViacomCBS did in the first three months of 2021. However, the rapid rise and even faster collapse of VIAC stock was caused by a combination of factors that won’t repeat.
The surge was due to optimism regarding the announcement of the company’s new Paramount Plus streaming TV service. Additionally, the company had inked new traditional TV deals with over a dozen key affiliates.
The positive outlook was amplified by retail investors on Reddit’s r/WallStreetBets forum, resulting in VIAC stock rapidly hitting improbable highs.
The inevitable post-hype slump was more severe than expected. CBS Viacom issued new shares to take advantage of it stock price. Then, it was entangled in the $10 billion collapse of Archegos Capital Management.
In other words, what we saw in March was a one-off event. VIAC stock has been holding steady since then.
Recent Earnings and the Future of ViacomCBS
On Aug. 5, ViacomCBS reported its second quarter earnings. Earnings per share of 97 cents were off estimates by two cents; otherwise, the quarter was good news for investors. Revenue of $6.56 billion was up 8% year-over-year and beat Wall Street expectations.
Global streaming revenue was up 92% year-over-year while advertising revenue was up 24%. Paramount Plus added at least 6 million subscribers for the second straight quarter, bringing its total to more than 42 million.
One of the big hits ViacomCBS took in 2020 was to its Paramount division’s movie business. The box office numbers say it all.
In 2019, Paramount movies sold 61.6 million tickets globally, grossing just under $564 million. The studio’s take in 2020 was just 19.7 million tickets for a box office gross of about $180.5 million.
Already in 2021, with films like PAW Patrol: The Movie playing in theaters, Paramount has surpassed 2020’s numbers with a gross of $228.5 million so far.
The assumption is that the pandemic should be well in check in 2022, leading to a full recovery of Paramount’s movie business — if not a resurgence due to pent-up demand.
Paramount’s movie business is a relatively small percentage of ViacomCBS’s overall revenue. However, having that division returning to health through 2021 and 2022 will be a positive for VIAC stock.
Bottom Line on VIAC stock
When I wrote about ViacomCBS in August, the CNN Business investment analysts had VIAC stock rated as a consensus “hold.” They’re not all on board at this point, but enough have shifted their position that the consensus is now in line with my thinking.
VIAC stock has stabilized, the company’s business is performing well and there’s long-term growth potential there. According to the CNN Business analysts, that’s 27.8% growth over the next 12 months, assuming shares hit their $50 median price target.
Everyone has their own level of risk tolerance. But I think if you’ve been eyeing VIAC stock in the months since it crashed, now might be the time to make a move.
— Louis Navellier and the InvestorPlace Research StaffApple to SHOCK Emerging $46T Industry [sponsor]
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Source: Investor Place