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Discovery, ViacomCBS Shares Fall Hard

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(Image credit: James Smith - https://pixabay.com/en/business-stock-finance-market-1730089/ archive copy, CC0, https://commons.wikimedia.org/w/index.php?curid=53690216)

ViacomCBS and Discovery shares sank like a stone Friday afternoon, dropping more than 30% each as the company weathered a string of analyst downgrades, speculation around big insider sales and mounting sentiment that their respective streaming efforts (Paramount Plus and Discovery Plus, respectively) could falter.

ViacomCBS shares fell more than 30% on Friday to $46.28 each, down $20.07 each, after Wells Fargo Securities analyst Steven Cahall downgraded the stock to “equal weight,” and lowered his 12-month price target on the stock from $82 to $59 per share. It was the second downgrade of the stock in two days -- MoffettNathanson media analyst Michael Nathanson issued a “sell” rating on the stock on March 25. ViacomCBS shares have fallen a collective 53% since March 23. 

Discovery stock was down as much as 38.5% to $35.54 (down $22.21 each) in early trading Friday, after some reports speculated that one of the company’s insiders was potentially contemplating a big sale of shares. 

Discovery shares have wavered over the past few days as well, dropping 13% on March 23 and another 7% on March 25. 

The pressure on the stock was high enough Friday that it forced Discovery to issue a statement refuting the speculation.  

In a statement, Discovery said that “today's trading activity is not the result of insider transactions or transactions by Advance/Newhouse Programming Partnership or its affiliates. The company issued its outlook for the first quarter of 2021 on February 22, 2021 and provided additional guidance at the Deutsche Bank TMT Conference on March 8, 2021, and is comfortable reaffirming its outlook and the additional guidance. 

"The Company is confident in and pleased with the execution of its strategy, both with respect to its traditional business and the direct to consumer roll out," Discovery said. "It looks forward to releasing first-quarter results and hosting its quarterly investor call on May 10, 2021."

In his report, Cahall wrote that he believes the momentum that had driven ViacomCBS and other streaming programmers like Discovery and AMC Networks to record highs in the past few months has shifted. 

“Now times are changing and we're changing with the times,” Cahall wrote. And though he doesn’t those stocks will retreat to their historic lows, “we do see gravity pulling the multiples closer to prior norms. As such, we're taking price targets and multiples down along with downgrades.”