From Wikipedia:
"ViacomCBS Inc. is an American diversified multinational mass media and entertainment conglomerate corporation formed through the merger of the second incarnation of CBS Corporation and the second incarnation of Viacom on December 4, 2019[4] (which were split from the original incarnation of Viacom in 2006) and headquartered at the One Astor Plaza complex in Midtown Manhattan, New York City, United States. The company operates over 170 networks and reaches approximately 700 million subscribers in approximately 180 countries, as of 2019"
Viacom is currently trading at just 6.46x earnings, making it one of the cheapest stocks relative to earnings in the S&P500. Most stocks trading at similar ratios are either cyclicals(IE Auto manufacturers). Viacom, however, has been consistently profitable, even during economic downturns. Of course, many may express concern that with the downfall of Cable, ViacomCBS may end up like Blockbuster.
Fortunately, ViacomCBS's execs are aware of this risk, and have diversified into streaming services. ViacomCBS has seen significant growth in subscriber numbers on their streaming platforms over the past year
Viacom has a tremendous amount of intellectual property in the shows and movies it owns. Its pivot into streaming services enables it to continue to leverage its vast content to produce earnings.
With its rapid growth with streaming, the stock is extremely cheap compared to competitors such as Disney and Netflix.
Why is the stock so cheap?
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Their balance sheet shows a significant amount of liabilities. These liabilities present a risk if the company's revenue continues to decline.Fortunately, ViacomCBS has been using their earnings to redeem senior notes to address this risk. As interest expenses decrease from paying off debt, this should enable them to grow earnings without needing to grow revenue.
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Investors are scared the stock will go down. ViacomCBS' stock price is down 45% over the past 5 years. When compared to the S&P doubling during that time frame, it feels like a bad stock to own. Currently, investors are piling in to big winners such as Nvidia, Tesla, etc. Solid companies at great prices just aren't on investors radar right now.
Just because the stock is down does not mean the company is doing worse, though. Viacom's Earnings Per Share is higher now than it was 5 years ago, yet the price is down nearly 50%. The stock went from a P/E of 15 to about 6-7 over the past 5 years. In other words, investors are paying substantially less for the same earnings.
3.The fallout of Archegos Capital management earlier this year resulted in a lot of shares hitting the market very quickly.
What's worth considering is with any value play, it can take a very long time before the market corrects itself. Don't buy in expecting to make a quick buck. The stock can absolutely still go down even on good news if investors fear the stock.
Other than the dividend yielding about 2.9%, it is likely ViacomCBS will use their earnings for both paying down debt, and investing in streaming.
Disclaimer: I currently own 100 shares of VIAC and intend to buy more if it drops further. Target valuation of $55.
Submitted November 23, 2021 at 12:13PM by skilliard7 https://ift.tt/3DPgX7W
