Analyst Upgrades Viacom's Stock, Predicts Ratings Will Stabilize

SpongeBob Squarepants - cartoon still - 2010
Courtesy of Nickelodeon

"We have just six more weeks until ratings and ad revenue comparisons start to ease," Wells Fargo's Marci Ryvicker says.

Wells Fargo analyst Marci Ryvicker on Friday upgraded her rating of Viacom's stock to "outperform," predicting that the company's TV ratings would stabilize in the coming weeks.

She also raised her stock target price range to $57-$59 from $50-$52.

"The time is now," the analyst said in a report. "We have been on the sidelines since launching coverage of Viacom on Jan. 30 primarily due to the ratings declines across the majority of Viacom's cable networks. At this point, we have just six more weeks until ratings and ad revenue comparisons start to ease, which is likely to be a catalyst for the stock."

She also argued that "the stock is still cheap" compared to sector peers and its own historical average price.

"We are not raising our estimates at this time, but do see the potential for positive revisions and multiple expansion upon the first sign of a ratings turn," Ryvicker said.

About the ratings troubles of the past year, she wrote: "Since mid-Sept. 2011, Viacom's two major nets - MTV and Nick - lost an average 9.3 percent and 25.7 percent of their target viewers, respectively. While we still do not know the exact culprit of the ratings declines, we believe the worst is coming to an end - which we are already seeing - given last week's trends."

Among other positive trends, Ryvicker also argued that "Paramount should have a better fiscal year 2013, boosting investor sentiment."


Twitter: @georgszalai