Viacom's Low Price Targets Are Arbitrary According To Wunderlich
Wunderlich’s Matthew Harrigan believes the expected ouster of five of Viacom, Inc.’s (NASDAQ: VIAB) board members, including CEO Phillippe Dauman, by controlling shareholder Sumner Redstone is likely to be accepted in the Delaware Courts.
Harrigan maintains a Buy rating on the company, with a price target of $87.
Ouster Of Key Members
According to Wundelich’s S&P 500 linked model, Viacom’s share price, despite the 6.8 percent rally on June 16, represents a 4 percent discount on annual advertising contractions through 2022.
Related Link: BTIG Upgrades Viacom As Redstone Initiates Regime Change
“Delaware Chancery Court asked by Redstone lawyers to affirm the validity of removals and nominations — countering lead Independent Director Fred Salerno's challenge to the ouster of the five members — including himself,” Harrigan mentioned.
Given that the controlling shareholder has the right to make board changes, as well as Viacom’s significant operational issues and slow adaptations to the digital behavior of its younger target audience, the analyst stated that it would be surprising if Redstone did not prevail.
“National Amusements requested that the current board remain in place with prohibitions on outside of the ordinary course of business actions until the Chancery Court affirms the changes,” Harrigan noted.
The analyst expected COO Tom Dooley to become the interim CEO in the event that Dauman is ousted, since Dooley remains on the board and offers crucial business knowledge and continuity.
On the other hand, Harrigan pointed out that “even with the constant turnover in network leadership, VIAB now appears to be making progress in areas like shorter form programming apropos for smaller viewing form factors and lessening advertising minutes while increasing CPM pricing through targeting, etc.”
Latest Ratings for VIAB
|Dec 2016||RBC Capital||Downgrades||Sector Perform||Underperform|
|Nov 2016||FBR Capital||Downgrades||Outperform||Market Perform|
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