As you may recall, ViacomCBS (NASDAQ:VIAC) investors suffered from collateral damage when Archegos Capital unwound its massively leveraged position in VIAC stock.
The shares literally lost half of their value within a week. It was a bloodbath, but clear-minded traders should reflect on what actually took place.
ViacomCBS wasn’t to blame for this incident. Rather, we should hold Archegos Capital accountable and consider the hazards of over-leveraging ourselves.
As for ViacomCBS, there could be an excellent buying opportunity here as one prominent analyst is bracing for a share-price turnaround — and possibly even a major merger.
VIAC Stock at a Glance
First things first: despite the share-price decline, ViacomCBS still offers loyal stockholders a solid dividend.
Specifically, VIAC stock’s forward annual dividend yield is currently 2.3%. Income-focused investors should consider this a definite plus.
Now, let’s take stock (pardon the pun) of the steep rise, and the equally precipitous fall, of the ViacomCBS share price.
At the end of 2020, the stock was trading at around $37. It’s fair to say that the rally of early 2021 was probably a case of “too far, too fast.”
In a spectacular run-up, VIAC stock flew to a 52-week high of $101.97 on March 15. Generally speaking, it’s not a recommended strategy to chase after a stock that’s made a parabolic move like that.
The Archegos scandal was largely to blame for the share-price tumble that ensued. However, the extreme steepness of the preceding rally might also have been a contributing factor.
By late April, VIAC stock had declined to $40 and change. The good news is that in the past few weeks, the stock appears to have stabilized and is comfortably adhering to the $40-ish level.
Scarcity Value
I’m glad to report that at least one Wall Street expert is prepared to make a bullish call on ViacomCBS now.
Reportedly, Bank of America analyst Jessica Reif Ehrlich recently upgraded her rating on VIAC stock from “underperform” to “buy.”
Not only that, but the analyst hiked her price target on the stock from $38 to $53.
That’s a substantial price-objective raise. In defense of this, Ehrlich cited ViacomCBS’s “scarcity value in an industry facing consolidation.”
There’s actually a lot to unpack in that brief phrase. First, in reference to the “consolidation,” Ehrlich observed, “Various recent press reports have suggested VIAC as a potential target with several assets that could command a premium.”
Now, I wouldn’t want anyone to mortgage their house and load up on ViacomCBS shares based on something that might or might not actually happen.
There’s no guarantee that ViacomCBS will be acquired or merge with a bigger company. Still, the possibility should be top-of-mind for prospective investors.
Take a Deep Breadth
The next question to ask is why ViacomCBS would be attractive as a merger/acquisition target.
Ehrlich has a compelling response to this question.
“VIAC’s deep breadth of content (library of 140,000-plus TV episodes and 3,600-plus films across sports, movies, comedy, news, children, etc.) has value as an entire entity or if sold in individual parts,” the analyst explained.
That backlog of content would certainly be coveted by ViacomCBS’s competitors. However, in the interest of full disclosure, I must relay a crucial warning to eager investors.
Any merger/acquisition deal involving Viacom would require the approval of Shari Redstone.
Through National Amusements, Redstone controls 77% of ViacomCBS’s voting shares.
And, Ehrlich cautions that “In the past, she has signaled herself to be an unwilling seller.”
On the other hand, “market dynamics could increase pressure to consider an offer or to proactively look to sell,” the analyst posited.
The Takeaway on VIAC Stock
It’s not necessarily a worthwhile exercise to try and predict whether ViacomCBS will be a merger/acquisition target in the near future. For the record, I rate VIAC stock a “B” in my Portfolio Grader.
Instead, let’s just focus on what we know. ViacomCBS has a vast catalog of entertainment content — and right now, the share price is quite attractive.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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