Signage is displayed at the ViacomCBS Inc. headquarters in New York
Tiffany Hagler-Geard/Bloomberg
Paramount+ may be the future of ViacomCBS, but the old-fashioned TV channel business will be in focus when earnings are released Thursday morning. Don’t be surprised if the company leaves investors wanting.
This year has already been an eventful one for ViacomCBS (VIAC) stock, which completed a round trip from $37 to $100 and back again. The surge and the tumble had little to do with fundamentals and everything to do with short squeezes, a hedge fund blowup, and who knows what else.
Fundamentals will be in focus on Thursday Morning. ViacomCBS (ticker: VIAC) is expected to report a first-quarter profit of $1.23 a share on $7.3 billion in revenue for the first quarter. Adjusted operating income before depreciation and amortization, ViacomCBS management’s preferred profit measure, is forecast to come in at $1.3 billion.
Of particular interest will be Paramount+, a rebranded and expanded streaming service that’s meant to transition ViacomCBS from its legacy cable, broadcast TV, and movie studio business models to a direct-to-consumer streaming future. The company expects to have up to 75 million streaming subscribers globally in 2024, but between now and then it needs billions of dollars to invest in content for its services and win those customers.
Part of that cash will come from an opportunistic stock sale, as Viacom issued about $2.7 billion of equity very near the top in late March. But much will have to come from its legacy cable businesses—and Viacom knows it. It splashed billions of dollars in March on renewing its NFL rights, including three Super Bowls, over the next decade, a key draw for its cable channels. And analysts are expecting ViacomCBS’ advertising revenues to jump 12% in the quarter, as the economy rebounds and companies spend on commercials again.
Of course, that was Wall Street’s thesis going into Discovery’s (DISCA) first-quarter report on April 28 as well, but the company badly missed estimates. That outweighed positive commentary from management about the Discovery+ streaming service, and Discovery stock dropped nearly 4% after the report.
Heading into earnings, the bulls will point to its valuation—ViacomCBS now trades for about 10 times forward earnings, in line with its average over the past five years and an undemanding valuation relative to the S&P 500’s 22 times—that seems too cheap for a future streaming giant. It’s appropriate for a company with under-pressure legacy businesses and deep-pocketed streaming competitors like Netflix (NFLX) and Walt Disney (DIS), say the bears.
ViacomCBS isn’t Discovery, but it also isn’t Netflix and Disney. Don’t be surprised if Thursday’s report is messy—and if that messiness isn’t enough for investors hoping for a glimpse of the future.
Heading into earnings, the bulls will point to its valuation—ViacomCBS now trades for about 10 times forward earnings, in line with its average over the past five years and an undemanding valuation relative to the S&P 500’s 22 times—that seems too cheap for a future streaming giant. It’s appropriate for a company with under-pressure legacy businesses and deep-pocketed streaming competitors like Netflix (NFLX) and Walt Disney (DIS), say the bears.
ViacomCBS isn’t Discovery, but it also isn’t Netflix and Disney. Don’t be surprised if Thursday’s report is messy—and if that messiness isn’t enough for investors hoping for a glimpse of the future.
Write to Nicholas Jasinski at [email protected]
