Film, MTV Drive Viacom’s Rating2/09/2007 7:00 PM Eastern
Wachovia Securities media analyst Jeff Wlodarczak started coverage of Viacom last week with an “outperform” rating, citing strong cable brands and expected growth at the film studios.
Wlodarczak’s report noted Viacom has attractive cable brands like MTV and Nickelodeon and that changes in the film division — naming Brad Grey to run Paramount Studios in 2005 and last year’s acquisition of DreamWorks — should right what had been a foundering ship.
Bolstering his outlook on the movie division is an encouraging slate of films for 2007. Wlodarczak also pointed out that as part of its DreamWorks merger, Viacom has the distribution rights for DreamWorks Animation’s upcoming Shrek 3 and that the last film in the Shrek animated series did about $1.5 billion in box office and DVD sales.
Although the cable networks are mature, Wlodarczak believes Viacom is poised to deliver growth at the high-end of the media sector. He estimated advertising revenue should grow between 6% and 8% through 2010 and affiliate revenue should grow at about a 9% clip through the same period, with further upside potential from the entry of the telephone companies into video.
“A solid spot advertising market, 2007 ratings stabilization, economic growth and a still material gap between cable and broadcast CPM’s should act as a wind at the back of ad results in 2007 and 2008,” Wlodarczak wrote.
Viacom is slated to release its fourth quarter and full-year financial results on March 1.