Viacom Updates: Company Worth $64 on Ad Sales Outlook

+208.41%
Upside
10.81
Market
33.34
Trefis
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VIA
Via Renewables

Source: Google Finance

Viacom’s (NASDAQ:VIA) Q4 results have a slight overhang due to decline in ratings of its most valuable channel Nickelodeon. We estimate that Nickelodeon constitutes about 15% to Viacom’s value and so is the single most important channel. However, the ad sales from this channel tend to be a greater proportion of overall ad sales in Q4, due to holiday season. Thus the impact of ratings decline could be more visible in Q4 and mitigate in the subsequent quarters. The company’s management stated at UBS’s annual media and communications conference that while there has been some softness in the ad market in recent weeks, things should improve in the Q1 2012. [1] This provides some encouragement for its medium term outlook as ad sales form an integral part of Viacom’s revenues as they do for other media companies such as CBS (NYSE:CBS) and News Corp. (NASDAQ:NWS)

See our full analysis for Viacom


In another development, Viacom has announced $1 billion in debt offering. The credit rating agency Fitch has assigned BBB+ rating to this new debt issuance and expects that it will be used for repayment of the earlier debt and share repurchases. [2]

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Overall it seems that analysts are slightly positive on the stock despite the fact that Q4 earnings could be affected due to Nickelodeon ratings decline. Equity research analysts from firms such as Morgan Stanley, Piper Jaffray, Benchmark Co. and Deutsche Bank have price targets for Viacom at $52, $53, $51 and $60 respectively. [3]

Our price estimate of $64.29 for Viacom, implies a premium of more than 30% to the market price.

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Notes:
  1. Viacom Sees Better Ad Growth in 2012, The Wall Street Journal, Dec 6 2011 []
  2. Fitch Rates Viacom’s Notes ‘BBB+’; Outlook Stable, Market Watch, Dec 7 2011 []
  3. Morgan Stanley (MS) Analysts Give Viacom (VIA.B) Shares a $52.00 Price Target, Localized USA, Dec 1 2011 []