ViacomCBS stock is declining as investors express doubts about streaming execution

Shares of ViacomCBS continued to plummet Wednesday, falling more than 20% as investors continued to react to a new stock sale and question the media company’s ability to successfully execute its streaming strategy.

The drop is a result of Tuesday’s stock dip, when stocks closed 9%. Shares began to decline this week after the company announced it would raise $ 3 billion from new stock offerings.

In a note on Wednesday, Bank of America Securities analysts said that ViacomCBS’s move to streaming was the “right strategy” for the media company, “but difficult to implement.”

The company launched its streaming service Paramount + earlier this month. Media companies have been pouring money into new content as the field gets busier, and the new money from the stock sale could help Paramount + from colleagues. But the analysts warned it will be difficult to compete with “large-scale streaming players” such as Netflix and Disney +.

In a note on Tuesday, AB Bernstein analysts wrote that they supported the secondary increase, saying it could provide a buffer against a drop in ad revenue or a way to put more money into streaming. But the analysts reiterated that the stock was “significantly overpriced” and warned that the company’s legacy was “insurmountable structural headwinds” and that it could “waste billions on streaming offers that we think will struggle to build their own. weight to bear “.

ViacomCBS wasn’t the only streaming newcomer to fall on Wednesday. Discovery shares fell as much as 10% after UBS cut the stock to sell. Analysts wrote that the burgeoning scream service “started from a better position than peers” with a stronger international presence and fewer legacy licensing deals (meaning there is less risk of cannibalizing existing revenue as it moves to streaming).

But the UBS note also warned, “We remain concerned about the ultimate scalability of the service in relation to the decline in linear business.”