ViacomCBS (NASDAQ:VIAC) is getting an upgrade from KeyBanc Capital to sector weight, as the investment firm notes the company's direct-to-consumer efforts are resonating with consumers.
Analyst Brandon Nispel upgraded the stock to sector weight from underweight after looking at the firm's Key First Look Data from credit cards to analyze Streaming Video on Demand services and found there is "improving momentum" of new subscribers and churn is lower.
"Paramount+ gross adds are up, so is SOGA, and importantly churn has moved lower," Nispel wrote in a note to clients. "We believe this suggests better Paramount+ net adds [year-over-year]. We estimate 4Q21 Global streaming net adds of 5.9M vs. consensus of 5.3M and 2.0M a year ago. Churn continuing to move lower takes away a key bear concern near-term."
ViacomCBS (VIAC) shares are down slightly less than 1% to $32.31 in pre-market trading.
In addition, Nispel added that Showtime gross additions are up and though churn is still at levels that are at industry high levels, the initial cohort churn has "improved considerably though the longer term retention suggests much room for improvement."
Concerning the other streaming services, Nispel noted that churn, which he believes is the most important metric for streaming services, is "too high" for most services, with Netflix (NASDAQ:NFLX), Disney+ (NYSE:DIS) and Hulu (DIS) maintaining "sustainable levels of churn" while the others have work to do.
He added that Paramount+ saw a notable improvement in churn this quarter, as did HBO Max (NYSE:T), while Peacock (NASDAQ:CMCSA) and Starz (NYSE:LGF.A) saw higher levels of churn.