Should You Buy the Dip in ViacomCBS Stock?

VIAC has spent the last four months in a consolidating pattern

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When we last checked in with ViacomCBS Inc. (NASDAQ:VIAC) four months ago, the broadcasting stock was still reeling from a devastating March bear gap. Four months is a long time, so it seems like an opportune time to check in on VIAC and check to see if its repaired that precipitous drop.

Or, not. ViacomCBS stock has traded in a tight range the last four months, between $40 and $47 for the most part. The shares remain up 10% year-to-date though, so the 12 of 18 analysts in coverage that rate VIAC a "hold" or "strong sell" may be primed to shift their stance soon.

VIAC Chart

ViacomCBS and Charter Communications (NASDAQ:CHTR) recently announced a comprehensive, multi-year distribution agreement for the continued carriage of ViacomCBS’ portfolio of broadcast, entertainment, news, and sports networks, in addition to licensing ViacomCBS’ suite of streaming services future distribution to Spectrum customers. The media company offers a forward dividend of $0.96 and a dividend yield of 2.35%.

The big news comes ahead of the company's earnings report set for Thursday, August 5 before the open. Recently, VIAC have outperformed earnings expectations on all four of its most recent earnings reports released. However, only one of those post-earnings reactions has been to the positive, a 3.4% pop back in August 2020. This time around, the options market is pricing in a larger-than-usual move of 8.8% for Thursday's trading. 

From a fundamental point of view, ViacomCBS is a very intriguing value investment. The stock trades at an extremely low price-earnings ratio of 9.04 and has a great forward price-earnings ratio of 11.07. Furthermore, VIAC has had consistent revenue and net income growth in recent years, aside from 2020 when its revenues dropped by 9% and its net income decreased by 30%. Nonetheless, ViacomCBS’ revenues are up 91% and its net income have grown a massive 689% since 2017. Overall, ViacomCBS stock is a viable long-term play for both value and dividend investors, especially after the stock had its price reduced by more than half and has not recovered yet.

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