Viacom Is Making The Right Investments, Macquarie Says In First Bullish Turn On Telecom

For the first time ever, Macquarie is recommending Viacom, Inc. VIAB and said the telecom is making the right investments in data and technology.

The Analyst

Analyst Tim Nollen upgraded Viacom from Neutral to Outperform with a price target lifted from $34 to $37.

The Thesis

The bullish case for Viacom is viable now, as the company's investments in technology to collect quality consumer data that will drive a higher share of premium-priced ads, Nollen said in the upgrade note. (See his track record here.) 

The company's leadership in OpenAP has resulted in new ways to find audiences in the upfront market, and its advanced marketing solutions group now accounts for nearly 10 percent of Viacom's U.S. ad base and is growing by as much as 40 percent, the analyst said. 

Viacom's future success is predicated on a stabilization of subscribers — which isn't guaranteed — but management is making the right moves to create better carriage terms with its affiliates, Nollen said. The Paramount unit is showing signs of rebounding and should post revenue and EBITDA growth next year, he said. 

Any prior merger talks with CBS Corporation CBS are "evidently off the table as a forced acquirer," the analyst said. Investors should look at Viacom's stock by itself, and it is looking cheap, Nollen said, with Macquarie's $37 price target based on an 8 times PE multiple, a discount to peers.

Price Action

Viacom Class B shares were up 3.45 percent at $31.79 at the time of publication Thursday. 

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