ViacomCBS Is a Rare Value
It's poised to capitalize on streaming trends and is trading well below what we think it's worth.
In a sector where undervalued opportunities are few and far between, ViacomCBS (VIAC) stands out, trading 30% below our $61 fair value estimate. We believe the company is poised to capitalize on the trend toward increased consumer adoption of streaming services with its relaunch of Paramount+ in March and the success of its other streaming platforms like Pluto. The flagship service offers not only a strong on-demand library from the company’s deep library but also access to CBS and its wealth of sports rights, including the NFL and March Madness, which helped to drive streaming growth over the first four months of 2021. With the recent renewal of Sunday afternoon NFL rights, ViacomCBS now controls two of its most important sports rights into the next decade.
Like larger peers Netflix (NFLX) and Disney+ (DIS), Paramount+ and Pluto should both benefit from international expansion. While the rebranded flagship Paramount+ service launched in 23 international markets in March, including 18 in Latin America, it has yet to launch in most of Europe, the largest non-U.S. market for Netflix, or India, the biggest international market for Disney+. Given the opportunity internationally and the relatively low guidance of 65 million-75 million subscribers by 2024, we think it’s likely that Viacom management will raise its outlook in the next two years, similar to the increase that Disney management made in December 2020.
Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.