Viacom Remains Neutral - Analyst Blog
May 22 2013 - 4:20PM
Zacks
We reiterate our long-term Neutral
recommendation on Viacom Inc. (VIAB). The company
reported mixed financial results for the second quarter of fiscal
2013. While the net income beat the Zacks Consensus Estimate,
revenues fell below the same.
Why Kept at
Neutral?
We believe that Viacom is well
positioned for long-term growth as it continues to benefit from its
predominantly cable networks-based business model, hit movie
releases, and monetization of contents from multiple distribution
platforms. Viacom significantly improved its viewership ratings for
its immensely popular Nickelodeon and MTV channels. In the reported
quarter, the viewership rating was up 7% year over year compared
with a stiff fall of 30% over the last one year.
Viacom is offering
video-on-demand websites to AT&T Inc.
(T)’s U-Verse customers, Time Warner Cable Inc.
(TWC) and DIRECTV (DTV) subscribers to watch their
content online, thereby driving their new TVEverywhere service for
the years to come.Viacom immensely benefits from its agreement to
distribute digital content to online video streaming companies.
Management is hopeful that it will be able to expand its digital
content distribution deals, both in the U.S. and internationally in
the near future.
However, in the last quarter, the
Filmed Entertainment segment suffered a blow due to a significant
drop in the carryover and catalog revenues. At present, more than
90% of the company’s operating income is coming from its pay-TV
networks. However, the U.S. pay-TV industry is facing severe
challenges from online video providers.Meanwhile, the stock price
has soared nearly 54% in the last year and is currently trading at
the high-end of its 52-week price range. We believe Viacom is
currently fairly valued.Viacom currently has a Zacks Rank #3
(Hold).
DIRECTV (DTV): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
VIACOM INC-B (VIAB): Free Stock Analysis Report
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