Why ViacomCBS Stock Has Fallen 55% in One Week

It’s been a breathtaking week for ViacomCBS investors. Shares of the media conglomerate slipped another 6.7% in regular trading Monday — and the company’s market value has now been chopped by 55% since March 22.

ViacomCBS has been beset by a confluence of factors that have crashed its stock price, after a huge run-up to start the year on enthusiasm for its direct-to-consumer streaming push.

The stock price slumped 23% last Wednesday after ViacomCBS announced pricing of its $3 billion stock sale in part to fund investment in streaming content, a move that would dilute the equity of existing shareholders. Wall Street analyst downgrades that cautioned that ViacomCBS was overvalued also put pressure on the shares.

Then, on Friday, investment firm Archegos Capital Management was “forced by its banks to sell more than $20 billion worth of shares after some positions moved” against the firm, which is the family office of former Tiger Management portfolio manager Bill Hwang, Bloomberg reported. That include large block trades of ViacomCBS and Discovery stock, both of which tumbled more than 27% Friday.

Shares of ViacomCBS closed at $45.01 Monday, down from a recent peak of $100.34 on March 22 (at which point the shares had zoomed up 174% since the start of 2021). Shares of Discovery declined 1.6% Monday; the company’s stock is down 47% from an all-time $77.27 per share on March 19.

The price-to-earnings ratio for ViacomCBS stock was about 10.8 times as of market close Monday, down from 23.4 times in mid-March, according to data compiled by Bloomberg.

The cratering of ViacomCBS stock could possibly threaten to derail its $3 billion-plus stock sales, CFRA Research analyst Tuna Amobi wrote in a note Monday. “We think the liquidation trade could pose a lingering near-term overhang on the shares, potentially compromising (if not jeopardizing) the pending equity offerings,” Amobi wrote.

Amobi, who retained a “buy” rating on ViacomCBS shares, added, “we see a gradual reversion to some stabilization in the fundamentals while the company increasingly pivots to its direct-to-consumer offerings (both subscription-based and ad-supported).”

Meanwhile, BMO Capital Markets analyst Dan Salmon on Sunday upgraded ViacomCBS from “underperform” to “market perform” and maintained his $70 price target on the stock. “Our unchanged target of $70 implies considerable upside, but we think Market Perform is more appropriate until trading volatility clears,” Salmon wrote in a research note.

BMO has projected a $3 billion free cash flow estimate for ViacomCBS’ streaming businesses by 2030. While “there is a wide range of potential outcomes around that estimate, we think it’s reasonable given VIAC’s vast library of owned content and accelerated shift to streaming.” BMO values the ViacomCBS streaming business at $45 per share on a 10-year discounted cash flow basis.

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