UBS Upgrades Viacom To 'Buy'

In a report published Tuesday, UBS analysts upgraded the rating on

from Neutral to Buy, while raising the price target from $73 to $81. In the report UBS noted, "The bear case for Viacom is centered on pay TV distributors dropping Viacom when its contracts come up for renewal and viewership declines continuing at severe levels as it loses audience to online video, hampering ad revenue, margins and the company's ability to buyback stock. Our thesis is simply that Viacom's longevity and business trends are not as dire as being discounted by the market and thus its valuation is too cheap; renewal & ratings catalysts are brewing that should shift investor perception." The analysts expect Viacom to "garner reasonable renewals" with Mediacom and

by mid-year and with

by the end of the year. The probability of a favorable Charter renewal has risen after

ended its pursuit of

. The analysts commented, "Charter is now in the pole position to consolidate cable, but dropping Viacom could impact regulatory approval of future deals, much less create operating uncertainty while likely trying to sustain its premium valuation." The analysts' analysis of changes in Nielsen's methodology indicates that declines in Viacom's viewership could "improve markedly" this summer. There are "early signs" of this in recent ratings. This suggests that advertising declines "should also then begin to improve, which also should benefit from efforts to monetize non-Nielsen measured ad inventory."