Streaming warsThe race is on for streaming fan favorites as they compete for attention in a post-Covid world.
- ViacomCBS lifted 3.77% to a two week high on Thursday to take its place as an S&P 500 top gainer, with stocks like Discovery (DISCA), Netflix (NFLX), Roku (ROKU) and Disney (DIS) joining in on the gains.
- The boost came from the Financial Times, which thinks that U.S. video streamers will spend a whopping $115bn on content in 2022.
- Content it King. It’s a way to keep attracting users as the pandemic-fuelled streaming explosion comes to an end.
Illustration by TradingView
Viacom shows off streaming successViacomCBS stock lifts over 7% on Thursday after the media giant delivers an impressive earnings beat, driven by its streaming and advertising revenue.
Shares of entertainment industry leader ViacomCBS saw their biggest jump since April after the company posted its second quarter report, which saw an influx of new streaming subscribers and gains in ad sales. The company reported earnings per share of $0.97 on $6.56 billion in revenue, compared to the $0.96 in earnings per share and $6.48 billion in revenue that analysts were expecting.
The year-on-year growth was thanks to a rebound in ad sales compared to 2020’s COVID-depressed second quarter and the firm’s increasingly robust streaming business. Non-streaming ad sales were up 24% to $2.1 billion, and revenue from its channel distributors like MTV and Comedy Central was up 9%. Its streaming segment could probably be considered the MVP of the quarter – the media giant brought in another 6.5 million subscribers versus the 4.1 million expected, and its streaming revenue was up 82% at $481 million, representing around 15% of its overall revenue.
We continued to accelerate our global streaming momentum and delivered phenomenal results across our flagship streaming services. Looking ahead, we’re excited about our opportunity to build on this momentum, as we scale Paramount Plus’ content offerings across genres and expand our reach with global audiences,
said ViacomCBS CEO Bob Bakish.
A new takeover target?In the midst of a media merger frenzy, ViacomCBS is looking like a tasty takeover target and a double upgrade from an analyst gives the stock a lift of just under 5%.
There has been a tidal wave of media mergers in Wall Street recently, and now everyone is looking to see who will be the next takeover target. ViacomCBS has had a rough time of it lately, and is yet to recover from the staggering 50% drop it caused by announcing its stock split in March. The share price has continued to fall since then, currently trading at around the $40 mark after reaching highs of more than $100 in March – which, according to Bank of America Merrill Lynch analyst Jessica Reif Ehrlich, could make it a “relatively sub-scale player” among the other giants in the media universe. But on the other side of the coin it also makes the company very attractive to big media corporations fighting over their market share. Ehrlich upgraded ViacomCBS two notches, from buy to underperform, and raised her price target from $38 to $53, noting that the company has scarcity value in the industry.
The recent deal between AT&T and Discovery got people talking about the media consolidation going on around them, and ViacomCBS has plenty to offer to the suitors that might come knocking.
In our view, VIAC’s deep breadth of content (library of 140K+ TV episodes and 3,600+ films) has value as an entire entity or if sold in individual parts,
Having previously worried about whether the company would be able to make the move over to streaming, Ehrlich reckons that any risks would probably be alleviated if it were to merge with a bigger partner. Though it's obviously all speculation at this point, Ehrlich reckons that Comcast is the most likely one to come to the door – together the pair would be a film powerhouse and have a significant footprint in ad-based video on demand, so watch this space.
ViacomCBS tumbles on stock offeringViacomCBS tumbles 23.18% following Wednesday’s stock offering. The recently reunited company (which was forced to separate by the Federal Communications Commission back in 1970) has had a rough week, but could brighter days be on the horizon?
First came love, then came the merger. Now comes a new streaming service that the media and entertainment giant is hoping to fund with a roughly $3 billion offering of equity securities.
Paramount+ was launched on March 4 and is competing directly with the big boys like Disney+ (DIS) and Netflix (NFLX). ViacomCBS says it expects to invest up to $5 billion in its streaming content by 2024, up from a reported $1 billion last year, while also aiming to hit between 65 to 75 million subscribers. Go big or go home, right?
But the latest big loss came off the back of an already volatile 9% dip following the offering announcement, and the newly combined ViacomCBS is facing some doubt from investors, who aren’t sure if they can pull off the service in such a competitive marketplace. Analysts have warned that it might be hard to compete with “large scale streaming players” like Netflix (NFLX); and a Bank of America analyst wrote that the move to streaming is the “right strategy but hard to execute”.
An AB Bernstein analyst is on board with the secondary raise as it will give cushioning against a downturn in ad revenue; however, he also warned the stock is overpriced and that the company could “waste billions on streaming offerings that we believe will struggle to carry their own weight.”
ViacomCBS wasn’t the only streaming stock down this week. Discovery (DISCA), who have just launched Discovery+, closed down 13% after UBS downgraded it to a sell.
Despite Tuesday’s stock dip though, shares of ViacomCBS are up nearly 145% year to date, and up 92% since the start of the year; giving it a market cap of around $43.4 billion.