UPDATED with closing costs and extra particulars. Shares in Viacom and CBS each declined greater than 8% Wednesday as buyers absorbed the main points of the businesses’ long-awaited merger throughout a broader inventory market retreat.
CBS inventory closed at $44.62, 8% decrease, and Viacom at $26.72, down 8.5%. Worries about weak financial information from China and Germany, in addition to motion of Treasury bond yields, a key metric that may sign a possible recession, despatched the Dow 30, Nasdaq and S&P 500 down sharply. President Donald Trump returned to his Twitter battle station, assailing “clueless” Federal Reserve coverage as the basis reason for the “CRAZY INVERTED YIELD CURVE” (capitals his).
Within the media and tech sectors, Viacom and CBS took a few of the greatest hits. The one different shares as a lot within the purple have been Discovery, AMC Leisure, Nexstar Media Group and Sinclair Broadcast Group, all down between 7% and 9%.
‘Hawaii Five-O’: Katrina Law Set As New Series Regular For Season 10 Of CBS Drama
Bundled into this grim macroeconomic portrait was the day-after verdict of the market on the Viacom-CBS merger, which was formally unveiled on Tuesday. The long-awaited deal had way back been priced in by most Wall Streeters. A day after the large reveal, although, the $30 billion, all-stock transaction has drawn some downbeat assessments from analysts, totally on the CBS aspect. The primary subject nagging at some analysts is the perceived threat of the merger tying a longtime, cash-generating bigger participant like CBS to the smaller and still-rebounding Viacom.
BMO Capital Markets downgraded CBS inventory to “market carry out,” with a brand new worth goal of $51.
Credit score rankings company Moody’s stated it was placing CBS on evaluate for a downgrade, and Viacom on evaluate for an improve. The flag on the CBS aspect, Moody’s stated, is because of “the choice by CBS to merge with a lower-rated and extra weakly positioned Viacom. Viacom depends closely on promoting and affiliate income from its massive group of cable networks, which face mounting structural headwinds from accelerating pay-TV subscriber losses.” Moody’s did acknowledge enchancment at Viacom in addition to its streaming prospects, each as an ad-supported VOD operator and as a provider of programming to subscription companies, together with CBS All Entry.
Financial institution of America Merrill Lynch upgraded CBS to “purchase” from “impartial,” and raised its worth goal to $63 from $58. Michael Nathanson of MoffettNathanson maintains a “purchase” ranking on CBS inventory and charges Viacom’s “impartial.”
In a analysis observe to shoppers, Nathanson highlighted what he referred to as the “placing similarities” between the mixed ViacomCBS and NBCUniversal. Nonetheless, he wrote, “judging by the tepid and languid [investor] response, the brand new firm should work additional onerous to show the monetary deserves of this mixture. Whereas constructing out DTC platforms takes each money and time to show, we predict the largest near-term alternative is to reclaim the misplaced economics from the silly determination to separate these property out.”
Michael Morris of Guggenheim upped his 12-month worth goal for CBS, to $59 from $57. He additionally upgraded Viacom shares to “purchase” from “impartial.” In a observe to shoppers, Morris wrote, “We see the mixed firm as extra strongly positioned to leverage its content material pipeline to pursue incremental development alternatives whereas sustaining a management place in linear video media.”
Cowen & Co.’s Doug Creutz issued a “modestly optimistic” response to the deal, preserving his “market carry out” ranking on CBS. Even so, he cautioned that integration challenges await, and he confessed to discovering that after years of buildup, the strategic rationale struck him as “not terribly compelling.”
Worst of all, per Creutz? “That ugly portmanteau of a moniker,” he wrote in a analysis observe. “Viacom is a reputation and not using a model. CBS-Paramount, or Paramount-CBS, would have been a much better selection.”