Analyst Cuts Viacom Stock Rating Due to 'Ongoing Ratings Weakness'
UBS entertainment expert John Janedis says his sense is that returning MTV series "are under-performing," which will lead to ad make-goods.
UBS analyst John Janedis on Tuesday downgraded his rating on Viacom's stock from "buy" to "neutral" citing "concerns related to ongoing ratings weakness" at Nickelodeon and MTV.
"While the stock is cheap" at current levels, "we expect it to trade sideways until some of our concerns are resolved," he said in a report.
Janedis also addressed investor concerns that digital availability of Viacom content may hurt its ratings. "We continue to think the concerns related to Netflix/Amazon viewing are overblown in the near-term, but from a content perspective, our sense is that returning series at MTV are under-performing, which will translate to further [advertising] make-goods and a drag on ad growth in fiscal year 2013," he wrote. "Weakness in the kids upfront could somewhat temper improvement in ad growth at Nickelodeon."
All of this led him to lower his revenue and earnings forecasts for the conglomerate's current fiscal year, which ends with September, and the following fiscal year.
For other big entertainment companies, Janedis mostly tweaked his financial estimates at the start of second-quarter earnings season.
For CBS Corp., for example, which is like Viacom controlled by chairman Sumner Redstone, he left his overall earnings expectation unchanged.
But he wrote: "We are tweaking our second-quarter network ad growth estimate to minus 2.5 percent, versus our prior flat estimate, to better account for the timing shift and associated revenue impact of the NCAA Final Four games, but we expect an offset with lower expenses at the network and film [unit]."