ViacomCBS Analyst Boosts Stock Price Target on Streaming Upside

Bob Bakish
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ViacomCBS CEO Bob Bakish

"There is room for ViacomCBS to be a number 3/number 4 player domestically," argues Alexia Quadrani, but downgrades Discovery's stock..

J.P. Morgan analyst Alexia Quadrani on Wednesday raised her price target on the stock of ViacomCBS, led by CEO Bob Bakish, by $5 to $35, highlighting potential streaming upside.

The company's shares are down 30 percent year-to-date "even after rallying off the bottom in March," she wrote in a report entitled "The Case for Paramount+ and Pluto in the Streaming Wars." "The stock trades at less than 10 times forward free cash flow and 7 times price-to-earnings, a valuation that provides downside support, especially in the context of improving ad trends and a potential market pivot toward value."

Quadrani argued that pay TV declines "continue to be a real headwind, but a quantifiable one," for the company, "while some cord-cutters are likely to move to ViacomCBS offerings." She concluded: "The next leg up for shares will require greater investor confidence in the company’s streaming strategy."

Following the recent announcement of the firm's CBS All-Access rebrand to Paramount+, the analyst argued the service was "better positioned than the market is giving credit (essentially nothing is priced in)." She added that "there is room for ViacomCBS to be a number 3/number 4 player domestically in streaming, behind Netflix and the Disney bundle (Disney+ and Hulu)."

She argued that Paramount+ "joins the streaming wars with advantages - in some cases not held by competitors - which are under-appreciated by the Street." Among them are the experienced and "consistent leadership" and the fact that the streamer "is already fully distributed" on such platforms as Fire TV and Roku "at a time when nascent competitors struggle to reach agreements."

Meanwhile, ViacomCBS' Pluto TV "is situated to lead the global AVOD space, given its presence across all platforms and backing from a strong parent company," Quadrani suggested. Overall, she maintained her "overweight" rating on the company's stock.

Quadrani on Wednesday also downgraded Discovery's stock from "outperform" to "neutral," citing a "lack of conviction in the company's SVOD plans.

Discovery's stock was down 3 percent, while ViacomCBS shares were unchanged in early afternoon trading.