Discovery and Viacom CBS shares fell on individual downgrades of Wells Fargo on Friday, as analysts expressed concerns that the media companies’ recent gains could be higher.
In early trading, ViacomCBS stock was up more than 12 percent, to $ 57.76, with Discovery shares down more than 21 percent to $ 45.50.
Viacom CBS, which operates Paramount Pictures, Nickelodeon, CBS and Comedy Central, peaked with a 160 percent year-over-year increase, which Wells Fargo said marked the end of a volatile period. The firm said it believes valuations are resetting to more “normalized levels”.
“We don’t think these media stocks will go back to their historical lows,” analyst Steven Köhl wrote, citing more optimism about the companies’ streaming businesses and “the potential for a sustainable nonprofit premium.” Nevertheless, Köhl said that “we see gravity at times pulling closer to prior norms.”
He cut his rating on ViacomCBS to below par weight with a $ 59 price target below his previous $ 82 share target.
He also cut Discovery, whose channels include Food Network, TLC, HGTV, and Animal Planet, which are overweight to equal weight and reduced their price target from $ 59 to $ 65 per share.
Nevertheless, Cahill said he is bullish on the company’s streaming strategy under the newly launched service, Discovery +. He cited a “strong prospects for the Discovery +” after a strong start to the year (and) pending international expansion with the Olympics.
Nevertheless, this is the second discovery downgrade of this week. Earlier, UBS had allocated the stock to “sell”, noting that the stock had risen nearly 150 percent this year and could go ahead on its own.
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