Happy Monday, Sumner Redstone

March 29, 2010

It was a very pleasant start to the week for Sumner Redstone’s Viacom, owner of  BET, MTV, Nickelodeon and the Paramount movie studio. A flattering Barron’s story, analyst upgrades… What more can a media company want these days?

Start with Barron’s. The financial weekly writes, “After a long dry spell, investors are doing a double take when it comes to the entertainment company controlled by its executive chairman and founder, the savvy and tenacious media mogul Sumner Redstone.” Why? That’s simple. The stock is cheap.

Indeed, that’s the theme of two analyst reports that landed today — one from Miller Tabak and the other from Bernstein — both of which increased their Viacom’s price target to $39 a share. That’s about 16 percent above the current price. Not shabby for a stock that’s already up about 81 percent in the past year.

Over at Bernstein, Michael Nathanson offers 11 reasons for investors to be buying Viacom. “Not one of these mention Jersey Shore,” he adds.

It’s worth taking a look at Nathanson’s 11 reasons — he makes a compelling argument. But most of what he and others like about Viacom can be boiled down to three broad points. (It’s Monday, we’re all about simplification today).

  • Financially, Viacom is looking fairly good. The company has only $193 million of debt to worry about in 2011, it has avoided bad acquisitions, and could soon launch a share buyback.
  • Business is on the upswing. An improvement in ad spending will no doubt help Viacom, which has has more exposure to the market than Time Warner or Disney; it has renewed affiliate deals at promising rates; Rock Band losses should be less than in 2009; and Paramount seems to be back on track.
  • Lastly, to bring this full circle, the stock is cheap. By a bunch of measures, it looks like a good buy. Just take a glance its price-to-earnings multiple. It is about 11 times 2011 earnings, and that puts it lower than Disney, News Corp, Time Warner, Discovery, Scripps and corporate sibling CBS.

Still, for all of that bullish commentary and analysis, how much did the stock rise today? Try 1 percent.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/