) competes with other media and broadcasting companies like Time
), News Corp (
) and Disney (
) in the media and entertainment business. Viacom recently released
its fiscal Q1 2011 earnings (quarter ended December 31, 2010) and
we have increased our price estimate based on improvements observed
in box office and media networks revenues.
Our price estimate for Viacom stands at $58.36
, which is at a premium to market price.
See our full analysis and $58.36 price estimate
One of the issues that Viacom faced in 2010 was a decline in
home entertainment revenues derived from low DVD sales. We have
previously examined these concerns, which continued into the most
recent quarter, and commented that these low DVD sales may be
temporary. Further, positive developments in the advertising market
are causing improvement in the amount of ad dollars being poured
into cable networks.
Cable Networks Getting Advertisement Attention
Viacom's CEO has previously indicated that there is ample
opportunity for cable channels to grow their advertisement revenues
by taking advantage of increased interest from marketers. For
Viacom in particular, the popularity of programs like Jersey Shore
will directly attract more ad revenues, as we've previously
The "Situation" for Viacom's Stock From Jersey
As advertising revenues recover, many advertisers will look to
target younger audiences through cable channels like Viacom's MTV.
Advertisers like American Express, which has traditionally placed
ads on broadcast networks, are also looking to reach cable
One Viacom competitor, Time Warner, recently released earnings
that indicated improving ad trends for cable channels. While this
is partially due to general economic and ad market improvement, we
believe Viacom has a particular edge. Viacom's operations are
cable-focused, whereas competitors often operate a mixed media
model of both cable and broadcast networks. If the recent ad
revenue improvement for cable channels is actually a result of ad
dollars shifting from broadcast to cable networks, Viacom stands to
see greater benefit than some of its competitors.
The modifiable chart above illustrates how changes to MTV ad
pricing affects Viacom's stock value.