Analysts at Deutsche Bank retained Buy rating on the shares of Viacom Inc. (Nasdaq: VIA) with a price target of $60. They state that Viacom is a near pure-play on the attractive cable networks sector including leverage over distributors, gaining advertisement share and low capital expenditure or working capital.
DB analysts state that Nickelodeon’s ratings have been soft but could begin to improve as new programming hits and advertisement revenue could re-accelerate in fiscal 2012 first quarter. They state that they are keeping their FY2012 earnings per share at $4.24 and raising their FY2013 EPS by $0.02 to $5.07. They add that the offset between an accelerate debt refinancing and the negative impact from poor Nickelodeon ratings. They state that Nickelodeon ratings are tracking towards a 15 to 20 percent decline for Q4 FY2011. They state Nickelodeon is a greater percent of Q4’s ad sales than they anticipated due to the impact of movie, video games and toy companies trying to reach kids during the holidays. Thus, the ratings decline has an incremental 250bp impact on ad growth beyond their estimates and they are lowering their Q4 FY2011 domestic ad growth to 2.5 percent. They state that Viacom stock has underperformed peers by 9 percent since July with the variance entirely in September and so far in December. The 9 percent underperformance represents $2.2 billion of lost value against the $139 million potential ad impact from poor Nickelodeon ratings this fiscal year and includes a period where Viacom exceeded FY2013 Q3.
Viacom operates as an entertainment content company in the U.S. and internationally. The company connects with audiences through compelling content on television, motion picture, Internet, and mobile platforms. It has a market capitalization of $27.28 billion with a P/E ratio of 13.75.
Shares of Viacom lost 2.05 percent, or $1.03, to trade at $49.23.
