Viacom’s (NASDAQ:VIA) VH1 has shown significant strength in primetime Television in Q1 of 2012. Its primetime ratings grew by 33% over Q1 of 2011, and this can be attributed to success of several original shows such as Mob Wives, T.I. & Tiny: The Family Hustle, Basketball Wives and Love & Hip Hop. [1]
However, what does this mean in context of Viacom’s stock? Unlike some other media companies such as News Corp (NASDAQ:NWS) and Time Warner (NYSE:TWX), Viacom depends a lot more on cable channels.
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We estimate that VH1 constitutes less than 7% to Viacom’s value, which is overshadowed by its biggest channels Nickelodeon and MTV. Although VH1′s ratings improvement will help Viacom on the margin, the increment value to its stock is very small. For instance, if we assume that VH1′s average weekly viewers totaled for the year 33% more than the previous year, it results in an upside of just about 2%. So while the rating bump is nice, it’s not enough to get the stock moving.
Our price estimate for Viacom stands at $64.29, implying a premium of about 25% to the market price.
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Notes:- VH1 Primetime Ratings Surge 33% in Adult 18-49 Demo in First Quarter 2012, Market Watch, Mar 26 2012 [↩]
