Why Has ViacomCBS Stock Fallen 36% in 2020?

ViacomCBS (NASDAQ:VIAB) investors have been disappointed. So far, the stock has fallen 36% YTD (year-to-date). Last year, Viacom and CBS decided to merge. They formed ViacomCBS in a transaction that closed in December.

However, ViacomCBS isn’t the only media company with struggling stock. Sinclair Broadcast Group (NASDAQ:SBGI) and Walt Disney (NYSE:DIS) stocks have fallen by 15% and 8.0% YTD, respectively. Comcast stock has fallen by about 1.0% YTD. Meanwhile, Dish Network (NASDAQ:DISH) stock has risen by more than 8.0% YTD. The company got a boost from the recent approval of the T-Mobile and Sprint merger. Dish plans to use the assets that T-Mobile and Sprint will divest to jumpstart its wireless business.

Why ViacomCBS stock fell

ViacomCBS reported disappointing results for the fourth quarter of 2019. The revenue fell by 3.0% year-over-year to $3.9 billion and missed the consensus estimate at $7.4 billion.

The adjusted EPS was $0.97, which was well below the consensus estimate at $1.44. High merger-related expenses weighed heavily on ViacomCBS’s fourth-quarter results.

ViacomCBS stock fell by 18% on February 20—the day it released the earnings results. Notably, the fall marked the stock’s biggest single-day decline in 2020.

However, ViacomCBS said that the fourth quarter was a transitional period. Overall, the results don’t reflect the company’s strength. The company’s management views any pullback in the stock as a buying opportunity.

Doubts about the video streaming strategy

ViacomCBS is in the process of expanding its video streaming business. The company plans to launch a new video streaming service that will combine its existing offerings like All Access. The new video service will also tap into ViacomCBS’s Paramount Pictures movie library.

ViacomCBS plans to continue its content licensing strategy. The company provides shows to third parties like Netflix (NASDAQ:NFLX). In running its own video streaming service and licensing content to third parties, ViacomCBS hopes to maximize the value of its content.

However, investors doubt that ViacomCBS’s strategy will be successful. First, the company is entering a crowded market where Netflix enjoys a big lead. Also, ViacomCBS will continue to supply third parties with shows at a time when Disney and other companies are saving their best content for their own video services.

Weak earnings and doubts about the video streaming strategy might have put pressure on ViacomCBS stock. However, the company’s management hopes that the future is bright. The company plans to eliminate $750 million in annual costs—up from the previous target of $500 million.