ViacomCBS is a U.S. media and entertainment firm that was founded in 2019 with the merger between Viacom and CBS and now operates around the globe. Including the production studio Paramount Pictures and subscription networks CBS All Access, Showtime OTT (merged into Paramount+ in 2021) and Pluto TV, the company owns a range of cable and TV channels.
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The portfolio of cable channels comprises such well-known channels as MTV, Paramount, Comedy Central, Nickelodeon and others. Three premium networks are also owned by the company which includes Flix, Showtime, and The Movie Channel. Paramount Pictures is known for such film franchises as “Transformers”, “A Quiet Place”, “Star Trek”, “Mission Impossible”, “Terminator”, “Teenage Mutant Ninja Turtles” and others.
We expect the company’s revenues to rise from the current $27.8 billion to $31 billion by the end of 2026, although the EBITDA margin is not projected to increase, as the company is heavily investing in the production of content. The creation of their own streaming services and licensing of content to other companies could, in our view, be the key drivers of revenue growth.
We note the plan of the group to detach non-core assets, which would help the company concentrate on the media business’s further growth and reduce the debt burden. The firm had already sold the website to CNET and signed a $2.18 billion agreement to sell the publishing company to Simon & Schuster. As part of this policy, the company also plans to sell its New York headquarters (Black Rock Building) building, calling for $1 billion for it.
Falling advertisement revenues, halting the release of films due to the pandemic, and reducing the success of the content of the business are the factor which could impact on the growth of the company.
We assume that the high-quality content library of the business is massively undervalued and may become an item for absorption by major technology firms that build subscription platforms, but do not have an adequate content library, so we put up a BUY recommendation for an investment period of 1 year with a target price of $43. The current price level of about $37 implies a medium term growth prospect of 16 percent for the stock.
