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Viacom’s Soul Train Buy Could Have Investors Tooting Their Horns

If you remember the Good Ole days of the 70s, you may get fuzzy butterflies when you read this story.

The music show, Soul Train, has been purchased by Viacom (VIAB). Even if you don’t remember the show, or you could care less, I thought to bring it to your attention because of the impact the purchase could have on Viacom’s bottom line. There may be some good investment opportunities if you are willing to stand to climate of the media industry right now.

The acquisition could be a boon for Viacom because it will couple the historically black music show with BET Networks, which is a division of Viacom. Viacom, like other media companies, are struggling in this new electronic age.

This combination represents an investment in an iconic franchise that lends itself to providing fans with a wide range of experiences across multiple platforms, beyond the television programs that audiences have watched for decades. The transaction serves to further strengthen BET’s investment in content and underlines the network’s leadership in music-related content.

According to a Viacom press release about the deal, owning Soul Train’s intellectual property will allow BET to further build on the success of the Soul Train Awards, which BET re-launched in 2009. It also strengthens the network’s commitment to original content. The assets acquired include one of the largest libraries of African American, music-oriented content in the world, including more than 1,100 television episodes and 40 television specials.

The addition of Soul Train could allow Viacom to create ancillary revenue opportunities ranging from live events to consumer products.

This is very important considering Viacom’s financial performance has led to declines in its stock price. Its shares are trading far lower than its 52-week high. It closed last week around $44, while its 52-week high was $72.72.

Also, on last week, RBC Capital Markets issued a negative note on Viacom. RBC’s action sent Viacom’s shares lower. RBC initiated coverage of the stock with an “underperform” rating and a $34 price target. The report stated overall that analysts, compared to its peers,  thought Viacom has “significant structural challenges” and “epitomizes ecosystem concerns.”

I won’t be too hard on Viacom, however. That’s because companies operating in the media space that are publicly traded are offering discounts on their stock trades like those that are usually seen when there is a recession. Many media stocks are selling off.

While it is faced with problems, Viacom has some characteristics that are positive. Its gross profit margin dropped slightly from 51.47% in the first quarter of 2015 to 49.49% in the first quarter of 2016. But its return on equity dropped from 69.95% to 50.59% for that same period.

Also, it offers a 3.84% dividend.

So maybe the Soul Train will offer the company just what it needs to get back on the right track. In the meantime, I think the company is a hold.


1 response to “Viacom’s Soul Train Buy Could Have Investors Tooting Their Horns”

  1. Dennis says:

    Hello Suckers….

    Despite the recent downgrades, I’m still a buyer of these entertainment companies. But I’m also a long term holder. I believe, rightly or wrongly, that more and more of the consumer’s budget will go toward entertainment so I’ve identified those companies that create or produce entertainment for accumulation. Viacom fits into this strategy but so does Disney, Comcast, Fox Networks, CBS, the Scripps Network and others.

    Only time will tell if I’ve made a mistake but I believe a holder of these companies will do well over an extended period of time.

    I wish you the best.


    Dennis McCain

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