Opinions
The Panic-Proof Portfolio (Stockchase Research)
ViacomCBS
VIAC-Q
PAST TOP PICK
Nov 25, 2021
(A Top Pick Sep 16/21, Down 18.5%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with VIAC has triggered its stop at $33. To remain disciplined, we recommend covering the position at this time. When combined with the previous buy recommendation, this results in a net investment loss of 20.5%. We will look for better opportunities elsewhere.
$33.240
Stock price when the opinion was issued
Broadcasting
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DON'T BUY
TOP PICK
Stockchase Research Editor: Michael O'Reilly VIAC is a media monster. Recently reported earnings beat analyst expectations and showed streaming sales were up over 70% and operating cash flow was $2.2 billion and cash reserves are now over $3 billion. Recent stock price volatility has been associated to a forced liquidation by hedge fund that impacted several other unrelated entities. This creates a good entry point as it is now trading at under 20x earnings, compared to peers at over 45x. It pays a modest dividend, backed by a payout ratio under 25% of cash flow. We would buy this with a stop loss at $25, looking to achieve $57.50 -- upside potential over 32%. Yield 2.19% (Analysts’ price target is $57.48)
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TOP PICK
Stockchase Research Editor: Michael O'Reilly We reiterate our recommendation of VIAC as a TOP PICK. It trades at 8x earnings, compared to peers at 20x. Currently it is valued at under 2x book value. It pays a good dividend, backed by a payout ratio under 25% of cash flow. It continue to build cash reserves, while paying down debt. We would buy this with a stop loss at $33, looking to achieve $52 -- upside potential over 28%. Yield 2.47% (Analysts’ price target is $51.96)
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BUY
UNtil recently, this has been dead money. It hit lows just three weeks ago. It's a broken stock, but not a broken company. The business has a lot going for it and it's now the beginning of a rebound. It trades at 9x earnings and pays a 2.75% dividend. It's a value play at a time when investors want value (looking for companies with real earnings. The Archegos debacle is now past them though it scared off many investors. VIAC is trading cheaply under any metric and its business is getting much better. Its last 3 quarters have beaten sales and earnings, not blow-outs but better than expected. He's optimistic about next month's report, because of football. VIAC has rights to football rights on the weekends which should serve their next quarter well. (NFL viewership is up 10% YOY.) Beyond sports, the Viacom side owns a grab-bag of popular cable stations, like Paramount Networks (whose season 4 premiere of Yellowstone had 14.7 million viewers). Viacom's streamer, Paramount+, launched last year and already looks promising. VIAC has gotten its act together and will turn around.
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