How ViacomCBS Became The Latest 'YOLO Stock'

ViacomCBS VIAC shares are up 161.5% so far in 2021, including a 67.2% gain in the past month.

Berna Barshay, editor and research analyst at Empire Financial Research, on Monday wrote about how and why ViacomCBS has become the latest “YOLO stock” for retail investors.

Paramount+ Launch: Earlier this month, ViacomCBS launched its Paramount+ streaming service, which Barshay said was really more of a rebranding of its CBS All Access service that has been around since 2014. Barshay said one of the biggest differentiating factors of the Paramount+ service from streaming service competitors Walt Disney Co DIS and Netflix Inc NFLX is that Paramount+ will offer NFL games, PGA Tour events and NCAA men’s basketball games.

Barshay said ViacomCBS’s recent surge caught both analysts and short sellers off guard. At the beginning of 2021, she said just five of the 28 analysts covering the stock had Buy ratings for it. ViacomCBS also had an elevated 20% of its float held short.

Related Link: 3 Short Squeeze Candidates In The Technology Sector

Nostalgia Trade: Barshay said Paramount+ is not a particularly mind-blowing service, and part of the stock’s recent momentum comes from a broad rotation from growth stocks to value stocks.

“But it also turns out that the stock is catching fire with the WallStreetBets crowd, which has previously displayed its penchant for highly shorted stocks reeking of nostalgia,” Barshay said.

GameStop Corp. GME, AMC Entertainment Holdings Inc AMC and Nokia Oyj NOK are all examples of struggling brands that young retail traders feel an affectionate nostalgia for.

“And what could be more nostalgic for a bunch of people in their 20s right now than the parent company of ‘SpongeBob SquarePants,’ a children's show that peaked in popularity about 15 to 20 years ago?” Barshay said.

While the nostalgia trade has generated some big gains for ViacomCBS in 2021, Barshay said investors should consider taking some profits off the table at this point. She said Paramount+ is at a tremendous competitive disadvantage to its larger rival services, and its sports offerings may be too narrow to attract enough sports fans.

Barshay said the trend for ViacomCBS is certainly pointed higher, and GameStop’s recent trading action suggests there could be another leg-up for ViacomCBS in the near-term.

“But on the fundamental merits, I wouldn't be surprised if the stock lost a third – or even half – of its current value over the next year,” she said.

Benzinga’s Take: A challenged legacy TV business, a fiercely competitive streaming video landscape and a crowded retail trading environment make ViacomCBS an extremely high-risk investment at this point. If you’re sitting on big gains from your ViacomCBS investment, it would be wise to consider locking in at least some of your profits given the company’s uncertain outlook.