Analyst Downgrades Viacom, Discovery Stocks, Cites "Structural TV Decline"

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Todd Juenger highlights "unprecedented" audience drops and growing SVOD consumption, saying content companies are "in denial"

Sanford C. Bernstein analyst Todd Juenger on Wednesday downgraded his rating on the stocks of Viacom and Discovery Communications and cut his price target on CBS Corp. and Scripps Networks Interactive.

"Four months of unprecedented TV audience declines, coupled with evidence of growth of SVOD consumption, is enough for us to conclude that something has systemically changed," he wrote in a report. "We believe ad-supported TV is in the early stages of a structural decline."

Added Juenger: "The content companies, however, are in denial - selling more content to SVOD to offset ad revenue shortfalls, which accelerates the problem. We expect increased content investment, against a declining domestic end market, will reduce return on investment and margins over time.‎"

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The analyst downgraded his stock rating on Viacom from "market-perform" to "underperform" and that on Discovery to from "outperform" to "market-perform. His price targets on the two stocks are $71 and $37, respectively.

Juenger also reduced his CBS price target to $55 and his Scripps target to $79. He continues to rate both stocks "market-perform."

Highlighting his sector favorites, Juenger wrote: "We continue to rate Disney, Fox, Time Warner 'outperform'." Juenger put a humorous headline on his report: "Denial - Not Just a River in Egypt."

Twitter: @georgszalai