ViacomCBS stock was downgraded by Deutsche Bank on Thursday.
Tiffany Hagler-Geard/Bloomberg
ViacomCBS shares have had a remarkable run, rallying 73% since early November, and 350% since their March 2020 pandemic low. But there is a growing sense on Wall Street that maybe the move has gone far enough.
Earlier this week, Citi analyst Jason Bazinet cut his Viacom stock (ticker: VIAC) rating to Neutral from Buy. And on Thursday, Deutsche Bank analyst Bryan Kraft reduced his rating to Sell from Hold, asserting that the rally has been driven not by any change in fundamentals, but more on “technical factors,” a nice way of saying the stock has seen a considerable short squeeze.
Kraft already had some fundamental concerns for the business. He thinks the company’s pending March 4 launch of Paramount+—a rebranding and broadening of its current CBS All-Access streaming service—faces difficult competition. And he notes that the NFL’s agreements with broadcasters—including CBS—expire at the end of 2022, leaving some uncertainty about terms for carrying games in 2023 and beyond. He expects “a significant step-up in price.”
The result of the repriced football rights will be a hit to the bottom line, Kraft says. “While we believe the NFL rights are a very important component of CBS maintaining affiliate and advertising revenue given the ratings delivery and fans’ passion for the programming,” he writes, “we expect the cost of renewing it to drive a step down in Ebitda [earnings before interest, taxes, depreciation, and amortization] and free cash flow in 2023.”
A combination of concerns about Paramount+ scaling up in a competitive environment, a higher price for football, and ongoing headwinds for the company’s core broadcast and cable networks leave little room for growth, he writes. Kraft is modeling just 3% annualized revenue growth through 2025, with zero growth in Ebitda.
Viacom shares on Thursday are down 3.5%, to $50.28.
Write to Eric J. Savitz at [email protected]
