ViacomCBS Stock Plummets 18% After Paramount Rebrand, Analyst Downgrade

ViacomCBS may have gotten “Star Trek” and “Sonic” fans excited with the news from its investor day on Tuesday, but Wall Street was not impressed as the company’s stock took a big hit on Wednesday, taking AMC Networks down with it.

At opening, ViacomCBS — which is soon to rebrand itself as Paramount — saw its stock drop nearly 18% to $29.58 per share, while AMC Networks fell 15% at around $37.95 per share. While both companies reported a big boost in streaming subscriptions and revenue, with ViacomCBS reporting $1.3 billion in global streaming income, ViacomCBS missed its earnings projections for the quarter.

Meanwhile, Bank of America downgraded its rating for ViacomCBS from “buy” to “neutral” despite the company’s bullish expectation that it can reach 100 million subscribers for Paramount+ and Showtime within the next two years, up from its previous projections of 65-75 million. Analyst Jessica Reif Ehrlich argued that building Paramount+ to be attractive to subscribers will require a heavy investment, which would impact its cash flow and operating costs through 2023 while Paramount’s theatrical division continues its push to rebuild its box office numbers after years of struggle.

“While subscribers have outperformed expectations, and should be robust in 2022, the long term margin guidance (low/mid 20%) for direct-to-consumer business will not be achieved until the back half of this decade while the legacy business is under continuing pressure,” Ehrlich wrote.

ViacomCBS CFO Naveen Chopra said on Tuesday the company’s direct-to-consumer spending would increase to $6 billion by 2024 as Paramount prepares to develop a variety of new films and TV shows, including a fourth “Star Trek” reboot film for theaters, a third “Sonic the Hedgehog” film and Paramount+ spinoff series starring Idris Elba, and the “Yellowstone” prequel streaming series “1883.” By comparison, DTC spending came in at $2 billion in 2021.