ViacomCBS Jumps After Double Upgrade, Analyst Raises Price Target By 39%

ViacomCBS Inc VIAC shares traded higher by 3.9% on Thursday morning after the stock landed a high-profile Wall Street double upgrade.

The Analyst: Bank of America analyst Jessica Reif Ehrlich upgraded ViacomCBS from Underperform to Buy and raised her price target from $38 to $53.

The Thesis: In the upgrade note, Ehrlich said ViacomCBS has “scarcity value in an industry facing consolidation.”

She said the recent deal between AT&T Inc. T and DISCOVERY COMMUNICATIONS INC. DISCA for TimeWarner suggests media industry consolidation could continue, and ViacomCBS has plenty of valuable assets that could be attractive to potential buyers.

“In our view, VIAC’s deep breadth of content (library of 140K+ TV episodes and 3,600+ films across sports, movies, comedy, news, children etc.) has value as an entire entity or if sold in individual parts,” Ehrlich said.

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The only potential complication to a buyout might be chairwoman Shari Redstone, who controls 77% voting interest in the company. Ehrlich said Redstone has been unwilling to sell in the past, but market dynamics may pressure her into a change of heart.

Prior to the upgrade. Ehrlich was bearish on ViacomCBS due to its difficult transition to a streaming model and the potential cannibalization of its legacy businesses. However, she said a larger buyer could have the capital and scale to invest in content, technology and marketing needed to effectively execute the transition.

Ehrlich said Comcast Corporation CMCSA is the most likely potential buyer for ViacomCBS, but tech companies such as Amazon.com, Inc. AMZN may also be interested. Recent reports suggest Amazon is already interested in expanding its media business and is potentially targeting MGM Studios.

Benzinga’s Take: After years of struggle to transition to a streaming model, a buyout deal could solve ViacomCBS investors’ problems in the blink of an eye.

If a deal is announced, the identity of the buyer, the price tag of the deal and any potential competing bids will determine just how much upside ViacomCBS investors can expect.

(Photo by Cam Adams on Unsplash)