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Why Shares of ViacomCBS Rose 30.2% in January

By Billy Duberstein - Feb 6, 2021 at 8:20AM

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Could this legacy media stock transition to the new streaming environment?

What happened

Shares of ViacomCBS (PARA 0.15%) rose 30.2% in January, according to data provided by S&P Global Market Intelligence. The legacy TV network provider has been under pressure from cord-cutting over several years, and its stock fell to bargain-basement levels last year amid the pandemic.

But a big announcement regarding ViacomCBS' streaming ambitions, along with a little help from marketwide short squeezes, helped shares rocket higher in the first month of 2021.

A man holding a remote control viewed from the back.

Image source: Getty Images.

So what

In January, ViacomCBS announced that it would be unveiling its new streaming service Paramount+ on March 4. In response, one analyst at Needham boosted her price target, believing the new streaming megabundle will boost ViacomCBS' valuation, as investors have generally boosted media stocks like Disney (NYSE: DIS) once they unveiled over-the-top streaming services.

ViacomCBS also made progress in its regular cable business as well, renewing contracts with 13 local TV affiliates from Sinclair Broadcasting (SBGI 2.71%). That likely contained fee increases, which will boost Viacom's affiliate revenue.

The boost came just before a band of retail investors began targeting heavily shorted stocks in January, attempting to force short squeezes. ViacomCBS had seen its short interest creep up over the past year, reaching nearly 20% of all shares outstanding as of Jan. 15. As many hedge funds began to cover their shorts, these types of stocks surged in January.

VIAC Percent of Shares Outstanding Short Chart

VIAC percent of shares outstanding sold short data by YCharts.

Now what

Don't look now, but much-maligned ViacomCBS is up a whopping 76% since the November elections and the announcement of new vaccines. CBS will also be airing the Super Bowl this Sunday, so the company should get a bump from that. While some may be looking to take profits on ViacomCBS after its big run, the stock still only trades at an undemanding 11.5 times 2021 earnings estimates.

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