Wall Street Starting to View Viacom as a Value Investment

| About: Viacom Inc. (VIA)

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HEARD ON THE STREET: Viacom Plays to Be Market Prize

  • Summary: Following Viacom (NYSE:VIA) Chairman Sumner Redstone's ouster of CEO Tom Freston earlier this month, fears spread on Wall Street that there would be a mass exodus from the company, especially from MTV, which is far and away Viacom's biggest asset and most consistent money maker. The fears appear to be unfounded as Judy McGrath, the head of MTV Networks, has indicated she will stay on. The result: Investors have started to again favor the company. After poor first quarter results, many had backed off recommending Viacom shares. Now several have added a 'Buy' rating arguing that with share price down 12% since January and Viacom trading at a lower P/E multiple (16) than other media companies like Disney (NYSE:DIS) and News Corp. (NASDAQ:NWS), the stock presents a value investment opportunity. New CEO Philippe Dauman is promising his investment focus will be similar to the approach taken by venture capitalists -- that is, to invest in start-ups with new ideas or technologies that would bolster Viacom's core media operation -- before they take off, rather than making a large acquisition.
  • Comment on related stocks/ETFs: Despite Wall Street's general excitement with Viacom's new CEO and its willingness to trust veteran media titan Sumner Redstone's convictions, Geoff Gannon argues that the firing of Tom Freston is a big step backwards for Viacom. For a comparative analysis of how Viacom stacks up against its competitors, see Rob Zenilman's chart.

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