ViacomCBS Falls Despite Stellar Q3 Results

Despite exceeding revenue expectations and attracting a higher number of global streaming subscribers, shares of global media and entertainment company ViacomCBS (VIAC) fell 4.4% to close at $35.90 on November 4.

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The media giant’s total revenue grew 13% year-over-year to $6.61 billion, surpassing Street estimates of $6.57 billion.

However, adjusted earnings stood at $0.76 per share, down 8% compared to the same quarter last year, falling in line with analyst estimates.

Similarly, VIAC’s Advertising revenue fell 1% compared to the same quarter last year, while Affiliate revenue rose 2% and Licensing and Other revenue grew 18%.

Year-over-year Streaming revenue recorded 62% growth, surpassing $1 billion for the first time, with 4.3 million global streaming subscribers added during the quarter.

The company also announced a Broad Distribution Agreement with T-Mobile US (TMUS), enabling the latter’s postpaid customers to earn one full year of Paramount+ Essential.

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Commenting on the results, President and CEO of VIAC Robert Bakish said, “ViacomCBS continued to show tremendous momentum across the business as we executed against our strategy… Looking forward, we’re thrilled about the fresh array of content coming to Paramount+ in the next few months and can’t wait to share it with our global audience. Our strategy is clearly working and we’ll continue to use the power of global content, distribution, and market expansion to drive scale.”

Analyst Recommendations

In response to VIACs quarterly performance, Needham analyst Laura Martin maintained a Buy rating on the stock with a price target of $80, which implies 120.6% upside potential to current levels.

Martin said, “We recommend the purchase of VIAC because we believe that the value of its streaming assets is material and growing, and will become an increasing focus now that VIAC will break out its streaming revenue separately. By implication, a sum of the parts analysis is the best way to value VIAC, we believe.”

The analyst added, “We recommend adding the value of VIAC’s streaming assets to Paramount’s asset value (including its valuable film and TV libraries). Using this methodology, we conclude that investors are essentially paying nothing for VIAB’s $5B of Segment EBITDA.”

Overall, the stock commands a Strong Buy consensus rating based on six Buys, four Holds, and one Sell. The average ViacomCBS price target is $55, which implies 51.6% upside potential to current levels. Shares have gained 25.2% over the past year.