ViacomCBS Analyst Raises Streaming Subscriber Estimates Following Success Of 'YellowJackets,' 'Dexter'

Shares of ViacomCBS Inc VIAC are off to a hot start to 2022, up nearly 20% already year-to-date.

On Friday, one analyst predicted the success of two of the company's new TV shows may have it positioned to exceed subscriber growth expectations for the fourth quarter.

The Analyst: Bank of America analyst Jessica Reif Ehrlich reiterated her Buy rating and $53 price target for ViacomCBS.

The Thesis: In her new note, Ehrlich said the recent success of streaming series such as Showtime's "YellowJackets" and "Dexter: New Blood" have pushed her fourth-quarter ViacomCBS streaming subscriber net additions estimate from 5.2 million to 5.7 million. However, Ehrlich said the company's Feb 15 investor event, not its upcoming earnings report, will likely be the stock's biggest near-term catalyst.

Ehrlich said ViacomCBS's streaming growth appears to be tracking ahead of schedule, and she wouldn't be surprised to see the company bump its 2024 target of $7 billion in streaming revenue even higher at the February event.

Related Link: Holiday Streaming Wars: ViacomCBS, Spotify Impress In December, While Disney And Netflix Downloads Drop

Ehrlich said ViacomCBS is still facing free cash flow headwinds from elevated content spending, which could make life even more difficult for the company when interest rates start to rise. In addition to raising her subscriber growth estimate, Ehrlich also cut her projected fourth-quarter FCF estimate from negative $464 million to negative $684 million.

Fortunately, the company should generate about $2 billion in additional cash flow from the sale of its Blackrock building and lot.

"In our view, VIAC is an attractive company with several assets that can command a premium for the right buyers and we continue to believe recent industry consolidation puts a floor in the stock over the near term," Ehrlich said.

Benzinga's Take: BofA recently reported ViacomCBS app downloads were up 48% year-over-year in the fourth quarter, compared to a 6% decline in downloads for Netflix, Inc. NFLX and a 38% drop in Walt Disney Co DIS service downloads. Legacy media companies like ViacomCBS must adapt to the new streaming landscape or face a real risk of becoming obsolete in the quickly evolving battle for viewer attention.