Barclays Upgrades Viacom, Sees 'Extreme Risks Priced In'

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In a report published Friday, Barclays analyst Kannan Venkateshwar upgraded the rating on
Viacom, Inc.
VIA
from Underweight to Overweight, while reducing the price target from $67 to $56. Analyst Kannan Venkateshwar said that the earlier Underweight rating reflected the structural shift that the media ecosystem was undergoing and the fact that Viacom had the most exposure to these shifts. "At present levels however the stock is starting to price in extreme scenarios," warranting the upgrade in rating, Venkateshwar explained. In the report Barclays cited the two "biggest fundamental sources of uncertainty" for Viacom as the growth rates in domestic advertising and in affiliate fees. At present levels, the company's stock already reflected "decline scenarios worse than newspapers," which appears to be "quite unrealistic." Venkateshwar commented that in the event that the underlying fundamentals continued to deteriorate, or in case succession issues were to arise in the near term at National Amusements, which is Viacom's controlling shareholder, "we believe VIAB could trade on asset value/option value instead of earnings, which could set a floor for the stock." The analyst believes that, at the present levels, Paramount seemed to be undervalued, with an implied EV that was insignificant, despite Paramount being among the "largest studios in terms of scale of distribution, production, and talent."
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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsBarclays
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