ViacomCBS Shifts Focus To Streaming: Does The Stock Offer More Upside Than Netflix?

Zinger Key Points
  • Cerity Partner's Jim Lebenthal notes that ViacomCBS raised guidance for subscriber counts and revenues from streaming by 50%.
  • Lebenthal says ViacomCBS now expects 100 million subscribers by 2024, which should generate about $9 billion in revenue.

ViacomCBS Inc VIAC shares are plummeting after the company reported weak earnings results, despite better-than-expected revenue and solid streaming numbers. 

What Happened: ViacomCBS reported quarterly revenue of $8 billion, which beat the $7.49 billion estimate, but the global media company reported adjusted earnings of just 26 cents per share, down from earnings of $1.04 per share year-over-year.

ViacomCBS said global streaming revenue grew 48% year-over-year to $1.3 billion, driven by strength in subscriptions and advertising.

Steaming subscribers reached 56 million after the company added a record 9.4 million during the quarter, "overwhelmingly led by Paramount+."

See Also: Expert Ratings For ViacomCBS

Lebenthal's Take: "This is not a broken story," Cerity Partner's Jim Lebenthal said Wednesday on CNBC's "Fast Money Halftime Report."

He is focusing on ViacomCBS's subscriber growth; "On that front, subscriber additions were well above expectations last quarter. Most importantly ... they raised guidance for subscriber counts and revenues from streaming by 50%," Lebenthal said.

ViacomCBS now expects 100 million subscribers by 2024, which should generate about $9 billion in revenue, according to Lebenthal. 

"If I just do an 'apples to apples' versus Netflix Inc NFLX on a per subscriber count [basis], that would mean in two years they're going to have a market cap of around $85 billion which is roughly five times what it is today," he said.

ViacomCBS has a very meaningful subscriber base, like Netflix, but it's growing its subscriber base much more rapidly than Netflix, Lebenthal emphasized. 

"The content is fabulous," he added. "I'll put that up against Netflix anytime you want."

ViacomCBS on Tuesday announced it's changing its name to Paramount Global in order to bring its portfolio of premium entertainment properties under a new parent company name. ViacomCBS is shifting its focus to streaming and plans to ramp up spending in 2022 in order to continue to accelerate the growth of its subscriber base.

VIAC Price Action: ViacomCBS is making new 52-week lows during Wednesday's trading session.

The stock was down 19.8% at $28.83 at time of publication.

Photo: courtesy of Paramount.

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Posted In: EarningsEntertainmentLong IdeasNewsTrading IdeasGeneralCNBCJim LebenthalParamount
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