Viacom plunges 24% on weak earnings and analyst downgrades


Investors are continuing to watch and react to the newest Q4 earnings results. What’s more, it appears that the markets are just as jittery as they were back when big tech stocks were reporting their results earlier in January. We’ve seen companies tank after reporting less than a flawless quarter. That’s kind of what happened today with Viacom (NYSE: VIAC), whose stock crashed as traders digested the earnings news.

Viacom announced it would be rebranding itself as Paramount Global, with the company doubling down on its content and streaming strategy. However, in the midst of this strategy transition, the company warned that it expects 2022 to be a tougher year for its bottom line. As far as shareholders were concerned, this wasn’t what they wanted to hear.

Otherwise, the actual Q4 results themselves were pretty strong. Revenues rose 18% to $8 billion, beating the 9% growth rate that most were expecting. Global subscriber numbers were up to 56 million as well while streaming revenues were up over 48%.

Our success was evident across all lines of business, and spotlighted by streaming, where we achieved our best quarter ever in streaming subscription growth – more than doubling our subscriber additions from last quarter with a record 9.4M additions, expanding our total global streaming subscribers to over 56M,” said Viacom CEO Bob Bakish.

However, profits declined a bit, with adjusted operating income falling by 73% compared to last year. Much of this has to do with the company’s investment into its fast-growing streaming segment.

While generally good news, the lower operating profits were the one thing that really got to most investors. The fact the company also warned about 2022 being a rougher year for profits also didn’t help.

Bank of American analyst Jessica Reif Ehrlich lowered her rating of Viacom from a neutral “hold” to a bearish “sell.” She also cut her stock price rating from Viacom down from $52 to $39 per share, saying that the company’s plans to move into streaming are going to hurt its financials for the short-to-mid term. Eventually this shift should pay off, but it will take a while before that happens. By 2024, Viacom’s CEO expects to have over 100 million subscribers.

Shares of Viacom were down 24.5% as traders digested the news. However, it wasn’t the only earnings miss on Wednesday that caused a selloff. Shares of Roblox were also down after reporting a tough Q4 of its own.

Overall, traders have been more reactive than usual when it comes to Q4 earnings. While most companies have surpassed Wall Street expectations, the hiccups seen by some big tech stocks (like Meta Platforms) has caused a lot of anxiety among some investors.

Couple that with the other reasons to be bearish right now, such as the Ukraine situation, high inflation, and the coming interest rate hikes, it might make sense that traders are more volatile than usual. A couple of years ago, these kinds of quarterly results wouldn’t cause much of a move at all, but nowadays, there’s an almost nigh perfectionist expectation from some investors hoping that all will stay well regardless of macroeconomics factors.