ViacomCBS, Discovery shares decline after recent records

Paramount Global

17/03/2021 19:26

By Sinéad Carew
    March 17 (Reuters) - Shares in ViacomCBS  VIACA.O   VIAC.O 
and Discovery Inc  DISCA.O  tumbled on Wednesday, pausing a
rally that has seen the stocks soar this year on increased
appetite for value names, newly launched streaming services and
an unwinding of bearish investor bets.
    ViacomCBS Class B shares last traded down 4.4% at $92.02
after hitting a record of $101.97 on March 15. Discovery shares
last traded down 3.6% at $73.09 after hitting a high of $76.61
on Tuesday. 
    ViacomCBS and Discovery have gained 146% and 142%
year-to-date, respectively, as investors piled into undervalued
names on expectations of a broader reopening of the U.S. economy
while also eyeing direct-to-consumer streaming services that
could help the more traditional media companies compete against
newer rivals.
    Shares of the companies were also boosted by investors who
had bet against the stock, now being forced to unwind their
positions in the face of a rising stock price, said Chris
Marangi, co-chief investment officer for value at Gabelli Funds,
which was Viacom's second biggest holder of voting stock as of
late January with 7.88% of Class A shares.  
    A similar phenomenon, known as a short squeeze, helped spark
a wild ride in shares of GameStop Corp  GME.N  and other names
popular with retail traders on Reddit’s WallStreetBets and other
online forums in January. 
    "Viacom was a beneficiary of the early stages of the
GameStop short-covering frenzy, as there was short covering
across the market," Marangi said.
    The number of Discovery Class A shares shorted have more
than halved since mid-January and stood at 40.5 million on March
16, according to FIS Astec Analytics data.
    Some 81.1 million Viacom shares are shorted compared to 96.4
million in January, the firm’s data showed. 
    Along with an increasing appetite for value stocks broadly,
Mirangi also cited interest in recent launches of ViacomCBS's
Paramount+ and Discovery's Discovery+ streaming video services
as both companies should benefit from a direct relationship with
consumers.  urn:newsml:reuters.com:*:nL4N2KU571  urn:newsml:reuters.com:*:nFWN2L20VM
    They are following in the footsteps of Walt Disney Co's
 DIS.N  hugely successful launch of Disney plus in Nov. 2019. 
    He noted that media stocks such as ViacomCBS and Discovery 
underperformed for years as investors felt they were "just going
to milk cashflow from the dying traditional media bundle."
    "The stocks have very quickly made up for several years of
underperformance," said Marangi. "From here its about execution
and that will take several years."

 (Reporting By Sinéad Carew; Editing by Ira Iosebashvili and
Nick Zieminski)
 ((sinead.carew@thomsonreuters.com; +1 (646) 223 6186; Reuters
Messaging: sinead.carew.thomsonreuters.com@reuters.net))