Analyst Downgrades Viacom Over Fears of MTV Troubles

Viacom's stock has been downgraded to "underperform" by Bernstein Research’s Todd Juenger.

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Juenger, who has been one of the company's fiercest critics of late, writes in a new report that investors might believe that they are "buying the cheapest stock in a rising sector," but he's not very optimistic about Viacom's operating outlook, citing ratings troubles and affiliate fee issues.

"While NICK has arguable bottomed-out, that doesn't mean it will necessarily get much better," he writes. "And more importantly there's another shoe dropping: MTV will be down double-digits across the next four quarters."

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Viacom is currently trading at around $56 a share. Nickelodeon has introduced a spate of new shows including a new incarnation of Teenage Mutant Ninja Turtles, which Juenger expects might offer a slight ratings rebound for the network, which along with a Viacom stock buyback, could mean a short-term stock rise for the company. But long-term, he says, "MTV (and other network) troubles cannot be ignored."

His stock target is $50.

Other industry analysts are higher on Viacom.

In August, Wells Fargo's Marci Ryvicker upgraded Viacom to "outperform," believing that ratings could stabilize and that low expectations were creating a buying opportunity. In September, Deutsche Bank's Doug Mitchelson wrote the price target should be more like $62, writing that viewership declines at Nick should be seen as "predominately cyclical." Also in September, Pivotol Research analyst Brian Wieser noted Nick as Viacom's "most important network" and said that problems were attributable to programming issues and competition, not changing viewing habits among children.

Juenger has a different opinion.

Earlier this year, the analyst wrote that digital venues like Netflix were stealing viewership from traditional TV, and when Viacom and DirecTV engaged in contentious carriage negotiations last summer, Juenger suggested that digital rights was one of the bigger issues.

Viacom and DirecTV eventually came to a deal. To many analysts, affiliate revenue growth projected in the high-single-digit to low-double-digit range was good news; Juenger believes that affiliate fee rates will come in below management guidance, especially over the long term.

At the moment, he's got his sights on MTV, saying that the return of Jersey Shore will provide only "short-lived salvation" since the popular reality TV series is ending after the coming season. Plus, while Viacom might have plugged one hole in the dam, he's betting upon leakage elsewhere.

He writes, "MTV (and other Viacom networks) have been starved as Viacom has funneled the majority of development dollars into NICK, while not increasing the overall rate of investment across the network portfolio."

Viacom had no comment.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner