Analysts at Deutsche Bank named media and entertainment giant ViacomCBS as a top stock pick for 2022, arguing that it trades at a much lower valuation than its rivals and predicting the company can become the next big streaming giant thanks to a vast content library.
Deutsche Bank recently upgraded ViacomCBS to a “buy” rating, hiking its price target for the stock to $43 per share—implying nearly a 23% upside from Monday’s price of around $35 per share.
The firm points out that ViacomCBS, which is having “greater success in streaming” as it now spends billions of dollars annually on content, is still significantly undervalued when compared to rivals like Netflix and Disney.
Viacom’s enterprise value is a fraction of other established streaming giants, “yet its annual content budget places it within the range of this peer group,” according to the analysts.
The media conglomerate also has huge appeal thanks to its massive portfolio of popular content brands including CBS-affiliated stations, Comedy Central, Showtime, Paramount Network and Pluto TV.
Deutsche Bank is bullish about the company’s streaming service launched last year, Paramount+, which boasts content such as “Yellowstone”—recently the most popular show on Cable TV—and prequel series “1883” on its platform.
Shares of ViacomCBS fell 1.3% on Monday despite the recent analyst upgrade; After falling over 20% last year, the stock is up over 8% so far in 2022.
“While not everyone will succeed in streaming, we think Viacom has an opportunity to transition its business model successfully given its content portfolio (including sports rights),” Deutsche Bank’s analysts wrote. “We understand the skepticism… However, Viacom does have IP (intellectual property) that has and continues to create hits.”
BIG NUMBER: 47 MILLION
That’s how many global subscribers Viacom CBS has across its streaming platforms Paramount+ and Showtime. Bigger rivals like Netflix, Disney and WarnerMedia’s HBO Max have around 214 million, 118 million and 69 million subscribers, respectively.
Ariel Investments founder and chairman John W. Rogers is also bullish on ViacomCBS, naming the stock as one of his top picks for 2022 in an interview with Forbes last month. In addition to ViacomCBS having a much “broader set of content” than many of its competitors, Rogers sees great value in the company as it continues to see subscriber growth and makes large investments in streaming.