E ViacomCBS: Why Most Of The Easy Money Has Been Made

Almost a year ago, ViacomCBS (VIAC) stock collapsed to a 10-year low of $11 due to the coronavirus crisis. The market priced the stock for a disaster due to the impact of the pandemic on the advertising revenues and the movie business of the company. However, as ViacomCBS has exhibited fairly resilient business performance and has decent growth prospects ahead, its stock has nearly quintupled off its bottom.

It is also worth noting that ViacomCBS is a significant holding of Baupost Group, which is well-known for identifying undervalued stocks that have fallen out of favor in the investing community due to short-term headwinds. Nevertheless, due to the steep rally of the stock, investors should realize that most of the easy money has probably been made on the stock and hence they should wait for a more opportune entry point.

Money, Profit, Finance, Business, Return, Yield

Image Source: Pixabay

Business overview

ViacomCBS is an American multinational media conglomerate based in New York City. It was formed in late 2019 with the merger of Viacom and CBS. ViacomCBS has been facing a strong headwind in its flagship businesses, such as MTV and Nickelodeon, which used to generate most of its revenues. Streaming providers, such as Netflix (NFLX), have become so popular that the traditional content providers like ViacomCBS have fallen out of favor.

Fortunately, ViacomCBS has begun to adjust to the streaming era, and as a result, investors now view the stock more favorably. In the most recent quarter, revenues decreased 9% and adjusted earnings per share fell 17% due to the impact of the pandemic on advertising revenues and theatrical revenue. However, ViacomCBS enjoyed 72% growth in the domestic subscriber count of its streaming business and 56% growth in its streaming and digital video revenues. Thanks to the strong momentum of this division, ViacomCBS is expected to report just a 15% decrease in its earnings per share in the full year 2020, with hopes for a return to growth in the future.


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