For Viacom, It Gets Worse Before It (Might) Get Better: Macquarie

In a report published Friday, Macquarie analyst Tim Nollen commented on Thursday's massive sell-off in

's stock following its third quarter print. Viacom reported a "weak" third quarter revenue of $3.058 billion (down nearly 11 percent year to date) but its earnings per share of $1.47 was in-line with analysts' expectations and "actually weren't so bad." In addition, management's tone during its post earnings conference call "was not necessarily worse" as the company is optimistic US advertising can recover in 2016. Viacom's management claimed it is seeing progress from its ad targeting Vantage and Velocity services. The analyst stated this is a "key" component of the company's growth as it needs to get the ad tech right to reach dispersing younger and mobile audiences. Nollen suggested that shares of Viacom are now "cheap" at 7.5x 2016 PE, but the near-term is clouded with no immediate catalyst to support the stock. However, the analyst hinted that there is hope for the company over the long-run. "We have long worried about Viacom's relative reliance on the pay TV bundle and its relative inability to sell content directly to consumers, as the low-cost nature of its programming is easily replicable on numerous newer online video services," Nollen wrote. "We do think traditional pay TV sub declines will be gradual, and we do see a glimmer of hope in Viacom's ability to reach consumers via better use of ad tech to target the younger demo. But this will take time." Shares remain Neutral rated with a price target lowered to $50 from a previous $64.