ViacomCBS Hit With Surge of Bearish Calls After 169% Stock Rally

(Bloomberg) -- ViacomCBS Inc. is falling out of favor on Wall Street as analysts warn the rally fueled by optimism about its flagship streaming service is overdone.

The giant media company got at least 10 downgrades since the start of 2021, with MoffettNathanson now advising investors to sell the stock. The decision drove a gauge of consensus ratings for the shares -- a ratio of all recommendations -- to the lowest level on record, according to data compiled by Bloomberg.

Traders have piled into ViacomCBS, with the stock soaring as much as 169% this year, after the launch of its Paramount+ service stoked investor optimism. The surge has prompted analysts to turn more cautious, with many arguing that the shares are now more than pricing in the firm’s potential in the streaming area. The announcement of a $3 billion stock sale earlier this week spurred a selloff in the shares, with the company losing about $18 billion in market value in just three days.

Aside from cautioning on ViacomCBS’s direct-to-consumer potential, MoffettNathanson noted there will be trade-offs as the company shifts more of its focus to its streaming business. Analyst Michael Nathanson said that as more premium content is shifted to those DTC platforms, as ViacomCBS has shown with its new NFL deal, the industry risks higher cord-cutting and increased viewer erosion -- which would hurt the company.

Barrington Research, Barclays, Credit Suisse, Citigroup, Deutsche Bank, UBS, Loop Capital Markets, BMO Capital Markets and Macquarie are among firms tracked by Bloomberg that downgraded ViacomCBS earlier this year. The stock has 5 buys, 9 holds and 13 sell ratings, according to data compiled by Bloomberg.

Citigroup, which had a neutral rating on the stock as of March 11, recently said it is “dangerous to be bearish” on ViacomCBS. Analyst Jason Bazinet noted there is potential for the company to break out streaming losses, allowing firms to shift to a sum-of-the-parts valuation approach, which would be bullish for the shares.

Media peer Discovery Inc. has also faced a slew of downgrades from Wall Street as enthusiasm for its streaming service has similarly helped lift the shares. The stock has been downgraded by at least four firms so far in 2021, including Barclays, Citigroup, Macquarie and UBS.

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