ViacomCBS has lost $30 billion in market capitalization.
Mark Kauzlarich/BloombergThe unravelling of ViacomCBS shares continued on Monday, reserving much of a mammoth rally earlier in the year as an extraordinarily wild ride for investors plays out.
Phase One was the great unwinding. As the pandemic unfolded, and stock prices swooned, Viacom shares simply collapsed, falling 73% from the final trade in 2019 to the March 2020 closing low at $10.97.
In Phase Two—call it the great recovery—the stock market bounced back. Viacom was among the biggest winners: The stock rallied almost 240% from the March low to the end of 2020, ending the year at $37.16.
During Phase Three, the buying panic, Viacom skyrocketed, apparently aided by a Reddit-fanned short squeeze, and high hopes for the company’s Paramount+ streaming service, which is largely a rebranded version of what was formerly called CBS All-Access. The stock peaked March 22 at just above $100.
Now we’re on to Phase Four. This is the reckoning, a slide triggered in part by Viacom’s decision to take advantage of the huge rally by selling more stock, but aggravated by selling reportedly linked to margin calls against the hedge fund Archegos Capital Management. The stock has now dropped for five straight days, in the process falling 55% and losing $30 billion in market capitalization.
Miraculously, the stock is still up 23% year to date.
The frantic gyrations have posed an issue for equity analysts. On Monday, two of the more bearish observers shifted to a neutral posture after the big selloff.
Loop Capital analyst Alan Gould lifted his rating to Hold from Sell, while moving up his target price to $48, from $43. To be clear, Gould is no fan of the stock. He simply thinks the recent slide has removed a lot of the risk, while he continues to see the company as a second-tier player in the streaming-video market.
“The stock was unusually volatile after its equity offering which was followed by distressed selling late last week, and there could be a bounce with reduced selling pressure,” he wrote. “We are not advocating buying the shares on this dip because we continue to believe the default streaming services in most homes will be Netflix, Disney+ and Amazon Prime, and Paramount+ will compete with HBO Max, Apple TV+, Peacock and Starz to be the fourth or fifth service in the home.”
He says he prefers Netflix (NFLX) to bet on streaming, or Fox (FOXA) to play the legacy media business.
BMO Capital analyst Daniel Salmon likewise lifted his rating to Market Perform from Underperform. He kept his target for the stock price at $70, but he isn’t as bullish as that suggests.
”Our unchanged target of $70 implies considerable upside, but we think Market Perform is more appropriate until trading volatility clears,” Salmon wrote. He said he would be more interested if the stock dropped below $35.
On Monday, Viacom shares were down 3.6%, to $46.50.
Write to Eric J. Savitz at eric.savitz@barrons.com
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