Enthusiasm over Viacom’s better-than-expected quarter lasted about 10 minutes.
On Friday, shares of the conglomerate plunged 14 percent, wiping out nearly $2 billion in market cap. The swoon came one day after Viacom reported an impressive quarter, sending shares briefly higher, though a few things disclosed by CEO Bob Bakish and other executives during a conference call quickly wiped out the gains.
Wall Street seemed spooked, for one, when Viacom said it still hadn’t received a June payment from China partner Huahua Media, which is in a $1 billion film-financing deal with Paramount. But CFO Wade Davis on Thursday minimized the development by noting Viacom has “been in business with Huahua for a long time, and they have and continue to be a valuable strategic, operational and financial partner.”
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Also weighing on the stock was Viacom acknowledging that a dispute with Charter Communications hasn’t been settled. Three months ago, Charter took several Viacom TV channels — MTV, Comedy Central, Nickelodeon and more — off its basic package and onto a higher-priced tier for new subscribers. It also created a bundle without Viacom or sports entirely, and Viacom has said such moves violate a carriage deal.
“I don’t fundamentally believe suing big customers is the way to solve problems,” Bakish told Wall Street, though Viacom may do just that.
The third problem that depressed shares on Friday was the warning that U.S. ad sales and subscription numbers on its channels remain in decline. While this is more of an industry-wide trend given cord-cutting and competition from YouTube, Amazon and Netflix, shares of Viacom’s peers were relatively flat Friday.
On Friday morning, Brian Wieser of Pivotal Research Group lowered his price target on Viacom to $34 from $40. “Investors in Viacom are subject to risks related to the hit-driven nature of video programming, perceptions around the ‘death of TV,’ and a deceleration of pay TV subscriptions in the U.S. and around the world,” Wieser wrote in his report.
On Friday, Viacom shares sunk $4.85 to $30.22, leaving it with a market cap of about $14.8 billion. On Thursday after the closing bell, Viacom reported that it earned an adjusted $1.17 per share in the most recent quarter, which was 12 cents more than Wall Street expected. Revenue was $3.36 billion while analysts were looking for $3.29 billion.
