The ViacomCBS logo is displayed on the Nasdaq MarketSite to celebrate the company’s merger, in New York, on December 5, 2019.
Brendan McDermid | Reuters
ViacomCBS shares continued to decline on Wednesday, trading at more than 20% as investors continued to react to a new share sale and questioned the media company’s ability to successfully execute its streaming strategy.
The slide comes after the stock fell on Tuesday, when the stock closed down 9%. Shares began falling this week after the company announced it would raise $ 3 billion from new share offerings.
In a note Wednesday, analysts at Bank of America Securities said ViacomCBS’s move to streaming was the “right strategy” for the media company, “but difficult to execute.”
The company launched its Paramount + streaming service earlier this month. Media companies have been investing funds in new content as the field becomes more crowded and new funds from the sale of shares could help Paramount + from its peers. But analysts warned that it will be difficult to compete with “large-scale streaming players” like Netflix and Disney +.
In a note Tuesday, analysts at AB Bernstein wrote that they supported the secondary increase, saying it could provide a cushion against a drop in advertising revenue or a way to spend more money on broadcasting. But analysts reiterated that the stock was “significantly overvalued” and warned that the company’s inherited business “structural headwinds” and that it could “waste billions on streaming deals that we think will struggle to support its own weight. “.
ViacomCBS wasn’t the only new streaming entrant to see a drop on Wednesday. Discovery shares fell as much as 10% after UBS downgraded the shares to sell them. Analysts wrote that its nascent screaming service was “starting from a better position than its peers” with a stronger international presence and fewer legacy licensing deals (meaning less risk of cannibalizing existing revenue as it shifts to streaming. ).
But the UBS note also warned, “We remain concerned about the ultimate scalability of the service in relation to the decline of the linear business.”