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Will Pluto, Other Digital Investment Help Viacom?

Dave Royse

Viacom, Inc. (NASDAQ: VIAB) shares were down on Monday after a mixed earnings report that also kept analysts lukewarm on the stock, though hopeful for a stronger second half of the year.

Viacom on Friday reported second-quarter revenue of $2.96 billion, below consensus expectations $3.08 billion, while EPS of 95 cents came in well ahead of the 81-cent Street estimate. Revenue was down 6 percent, and core domestic affiliate growth was flat, but the company expects increased investments in digital initiatives to bring a return to growth in the remaining two quarters of the year.

Hopes For Digital Boost

KeyBanc Capital Markets analyst Evan Wingren, who kept a Sector Weight rating on Viacom, said in a note to investors that Paramount adjusted operating income improved year-over-year as the studio focused on cost control, and Wingren expects that to continue.

But the big thing to watch is the company's suggestion that investments in digital initiatives are expected to ramp in in the second half, likely above previous expectations.

Guggenheim analyst Michael Morris noted the company is looking to ramp up its new free-to-use, ad-supported internet-TV service, Pluto TV, which it acquired in January. Among the new initiatives coming are the launch of Pluto Latino in the U.S. and international launches in Switzerland and Latin America.

View more earnings on VIAB

Morris continued a Neutral stance on Viacom, with a $30 price target. It’s not clear how much the digital spending will help the overall business, though.

“We continue to see Viacom facing secular pressure, and are not sure that notable digital efforts will be sufficient to shift the pressure on the core linear business,” Wingren wrote in the note.

Price Action

Viacom shares ticked up on Friday after the EPS beat, but were trading down 3.8 percent at $28.42 on Monday afternoon.

Related Links:

Analysts React To Viacom's 0M Acquisition Of Pluto TV

Viacom Is Making The Right Investments, Macquarie Says In First Bullish Turn On Telecom

Latest Ratings for VIAB

Date Firm Action From To
Apr 2019 Upgrades Sector Perform Outperform
Mar 2019 Upgrades Hold Buy
Jan 2019 Upgrades Hold Buy

View More Analyst Ratings for VIAB
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