Lowering ViacomCBS Stock Fair Value to $58

ViacomCBS VIAC, which will rebrand itself as Paramount, posted a mixed end to a tumultuous 2021. Paramount+ and Pluto posted strong growth, with 7.3 million net subscriber additions and a 10 million increase in monthly active users, respectively, as the firm finally broke out its streaming metrics. They also updated its long-term streaming subscriber guidance for 2024 to 100 million, up from 65 million to 75 million. To hit this number, management plans a sharp increase in content investment, mirroring plans at rivals Disney, NBC Universal, and Warner.

We are lowering our fair value estimate to $58 from $61 as we expect the continued investment required to grow the streaming business will limit margin expansion more than we’d previously expected.

While the ViacomCBS investor day, held in conjunction with the earnings release, was packed with the now customary dizzying array of clips from new shows and movies, the presentation was mainly focused on the firm’s perceived competitive advantages in the direct-to-consumer market. We thought that the presentation laid out a reasonable path forward but for the firm, don't believe that the presentation will assuage skeptics about the firm's ability to compete in a very competitive streaming landscape.

Revenue increased 16% during the fourth quarter, driven largely by licensing and streaming growth as all platforms posted strong subscriber additions and monetization. Unlike its peers, affiliate fee growth was anemic, particularly on the cable side. Total global streaming subscribers increased by 9.4 million during the quarter to over 56 million, led by Paramount+. We long believed that the previous long-term guidance was very conservative and think that the new guidance is also quite achievable. Paramount+ is only available in 26 markets and we expect that the number of markets will double in 2022 alone. ViacomCBS is working with a number of local partners for launches including Canal Plus in France and CJ E&M in South Korea.

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