ViacomCBS Skeptics See Prospect of More Pain After 55% Drop

ViacomCBS Inc. went from the top of the S&P 500 to near its bottom on Monday, being hit from all sides and erasing more than half of its value in just one week.

Multiple downgrades, an ill-timed stock offering and, as a final blow, at least two large block trades linked to the forced liquidation of Archegos Capital Management, brought ViacomCBS down from a record $100.34 on March 22 to $45.01 Monday. The stock fell 55% in five sessions.

With the selloff, ViacomCBS’s valuation has returned to average levels after skyrocketing earlier this year. The price-to-earnings ratio for the stock was about 10.8 times Monday, down from 23.4 times in mid-March.

A ViacomCBS corporate communications representative declined to comment on the recent drop in its shares.

The slump wasn’t enough to convince some analysts and investors that the stock price now is where it should be.

Argus Research analyst Joseph Bonner said ViacomCBS appears relatively pricey and noted it remains to be seen whether the company will be able to compete with streaming industry leaders Netflix Inc. and Walt Disney Co.

Meanwhile, Loop analyst Alan Gould emphasized his preference for Netflix when it comes to streaming, echoing an earlier call from Argus.

“We are not advocating buying the shares on this dip because we continue to believe the default streaming services in most homes will be Netflix, Disney+ and Amazon Prime,” Gould wrote in a research note.

ViacomCBS Skeptics See Prospect of More Pain After 55% Drop

For those on Wall Street that like ViacomCBS, the selloff has created a buying opportunity with shares now at a more attractive valuation.

“When you have liquidation events like this, the market can overshoot to the downside just as easily has it had been overshooting to the upside,” said Jack Janasiewicz, a portfolio strategist at Natixis Investment Managers, which has $1.4 trillion in assets under management. “If you like the fundamentals, this could be an opportunity.”

Brian Battle, director of trading at Performance Trust Capital Partners, said the short-term moves for ViacomCBS and Discovery are all headline driven. He anticipates investors will return their focus to fundamentals as the news passes in the coming days.

What Bloomberg Intelligence Says

“A 160% surge in the stock prices of ViacomCBS and Discovery before a crash landing March 23-26 highlights the dilemma investors face in evaluating the outlook for traditional media as it balances streaming growth with a legacy-TV business.”

-- Geetha Ranganathan, BI senior media analyst

Click here to read the research

©2021 Bloomberg L.P.

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