Brean Capital Upgrades Viacom To Buy, Sees Plenty Of Catalysts

The stock valuation for Viacom, Inc. VIAB now reflects most, if not all, the negatives, according to Brean Capital’s Alan Gould, and while the sentiment is still negative on the stock, there are sufficient potential catalysts that lead to a positive risk/reward ratio.

Gould upgraded the rating on the company from Hold to Buy, with a price target of $44.

Positive Catalysts

Given that the company now has a new board, the analyst believes there are several potential positive catalysts, such as a new plan from the new management team led by Tom Dooley, which likely focuses on the cable networks that generate 85–95 percent of the affiliate revenue.

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Gould also believes there is a plan to bring back Paramount at least to breakeven profitability, which could be achievable, given that an estimated more than $300 million is expected to be generated from the 67-year-old library.

The analyst also sees as positive the potential monetization of 48 percent of Paramount, “for $4+ billion after-tax even though the Street seems to be highly discounting this scenario.”

Although “much less likely,” Guild believes that with enterprise value of $26 billion and assuming a conservative after-tax value of $5 billion for Paramount, an acquisition of Viacom by another entity could prove to be a positive catalyst.

The analyst went on to say it was also possible that the new board brings in new management, “perhaps an executive with digital expertise and a plan that excites shareholders.”

Full ratings data available on Benzinga Pro.