The Most Undervalued Stock In All The Market RN! via /r/wallstreetbets #stocks #wallstreetbets #investing


The Most Undervalued Stock In All The Market RN!

Hello fellow autists. If you're tired of losing money on 0TDE options and starting to think about buying good companies, that make good products/ services, make a profit and you're thinking about leaving your money there for a couple of years playing the long game…say less.

The Markets

The markets (including almost every stock within it) have bled since about Nov of last year. We are coming up on the 8th month and according to Google, the average length of all bear markets has been 289 days, so 9 and a half months. You may want to start thinking about front running and nibbling on some of your favourites. Sure, we can a bit lower…but good companies are on sale rn and markets have historically recovered %100 of the time! Plus, the fear in the markets is same or worse than March 2020, the valuations have shaved off more capital than all the other downturns combined, and everything is technically VERY oversold. Again, we can go lower…but the risk vs reward is heavily skewed to the upside now.

The Play

Paramount Global (ticker: PARA) is ViacommCBS and I am going to show why I think they are one of the most undervalued, overlooked companies in the world, and therefore possibly one of the best investment opportunities in the markets rn.

The Who

Paramount has some of the most iconic and highest grossing media brands ever made thanks to Nickelodeon. Just between Dora The explorer ($15.8 billion), Teenage Mutant Ninja Turtles ($15.4 billion) and SpongeBob Squarepants ($14.8 billion), they've made $46 billion dollars. They have many, many more big brands (think licensing for merchandise, etc) as they host one of the richest content libraries in all media (Star Trek, Top Gun, Mission Impossible, Paw Patrol are just some of the other ones). Their broadcast channel CBS is no slouch either; 7 out of the top 10 Most Watched Broadcast Series in the 2021/2022 season belongs to CBS (this allows them to demand top advertising dollar).

https://preview.redd.it/2aie1bx2biz81.png?width=640&format=png&auto=webp&s=60b49a630001eaf9e1e44a7bf629db5da1c662ee

The Fundamentals

They have about 608 million shares outstanding and made just above $6 per share profit last year. They pay a $0.96 annual dividend which amounts to about %3.4. They have about $10 per share in cash. Here, we have a company trading at a PE ratio of under 5 that is trading well below it's book value. Book Value is around $35. That means, if it went BK over night and they stripped it and sold off it's assets, you would get $35 a share…yet, the commons are trading at just above $28 today! Now, some people will say "ya but that book value includes goodwill and intangibles"…but the intangibles are those same brands I mentioned earlier. For example, Disney bought Star Wars $4 billion, and they also bought Marvel for $4 billion. How much would selling each of the brands I mentioned fetch? Probably a lot more than the $18 billion market cap that the company stock is worth today! If they have $10 in cash per share…then ALL those other brands are worth $8 billion dollars? Not a chance.

Now, Paramount is also turning to growth as it transitions from making money off licensing it's products to other networks and streamers, to going DTC through it's own streaming service, Paramount Plus. P+ is only a year old, but was CBS All Access before. They are growing an enormous clip. Where did all the Netflix subscribers go? I think a lot are moving over to Paramount, who is growing so fast, management revised it's projections from 60 million subs next year to 100 million subs. Currently, between P+ and their other paying subscription services (Showtime, OTT), they have 60 million paying subscribers! By comparison, #1 Netflix has about 220 million and Disney has 205 million paying subs. Paramount is not likely to take over the #1 or #2 spot, but 3rd or 4th is a lock. Third place would be Warner Bros Discovery with about 100 million. Currently PARA is in 4th with 60 mil but I believe they can over take WBD in the next few years as they bring more of their licensed shows back in house – as is their game plan. This shows they are very undervalued pegged up against it's industry peers and the industry averages. They will get to 200 million subscribers in the next 3-5 years, unless they get bought out before then. So there is tremendous growth ahead, yet it's not getting the same "growth" type valuations. It's being valued as solely a legacy cable business that has shrinking profits. Not true. While the year over year revenue declined in the most recent financial filings, this was due to the fact they had the Super Bowl last year and not this past January. Without the "Super Bowl" effect, revenue is actually up. They are a Free Cash Flow machine. While they themselves are projecting their earnings to go down in the next 1-2 years, this is bc they are spending more on content and investing back into their streaming business…by 2024, they are going to be doing 9 billion in revenue from the streaming DTC side alone. This is getting 0 love. I believe it will all change and the stock will double, if not triple from these levels. Even at double the current price, at around $56 per share, I'd say it's undervalued.

Industry Peers

The Technicals

The stock has bounced off the low 27s twice now since the new year and bounced up to the 37 resistance zone. It's dropped now once again due to shitty market conditions, but I believe it is now setting up the rare triple bottom. I'm aware it dropped a bit lower than the previous $27.25 low, but I don't believe double/ triple top or bottoms need to be to the exact cent, I think %1-2 is within range. There is a juicy open gap around $35 that I believe will get closed sooner rather than later, and then there's the open gap way up top around $85 which I also believe will close -albeit that one may take some time. Maybe not though. There is also evidence of some bullish divergence on numerous time frames as is also evident in a ton of other names, and even the indexes. I believe they've got everyone on the short side, buying puts…and the markets are about to melt up fuelled by short covering, and people jumping back in with FOMO as they realize they missed the bottom.

The Bonus

Shari Redstone is the controlling shareholder of the Board. She put down almost $3 million of her own money and bought the commons in Feb between $28 and $29, so basically where we are now. She also bought back in November 2021 at around $36 but that was a much smaller buy. They say do as insiders do and Shari has loaded up over $3 mil of her money as she feels like me, this is very undervalued and we should be able to make some money buying shares down at these levels. On top of this organic growth, there has been much speculation that Shari wants to sell the company. Since there has been a lot of consolidation in the industry (Amazon buying MGM, Warner Bros buying Discovery, etc)…people feel Paramount is next to be swallowed up. At just $18 billion market cap, someone could want the content library and fairly low valuations even if you bought it at $60 a share, that would still be under $40 billion dollars. There are only a few people that could do that, in my opinion it would be between Amazon, or Apple. I'd say Disney and Comcast in there as well, but those deals might involve separating CBS out of the deal and just buying Viacomm, as there might be some anti-trust issues if they took in CBS as well. Earlier this year, when the CEO Bob Bakish got asked a question about his company, he gave a really odd response starting with "When I look at buying a company"….why even mention that isn't the plan? He's hinted the company is up for sale and why not, PARA is a prime acquisition target and while that may not be a reason to buy into a company on it's self, it's just one more reason I sleep easy at nights.

Another short term bonus is that Top Gun 2 is coming out in a couple weeks and it's looking like it's going to be one of the biggest blockbuster in recent times! Early reviews are crazy good! They are going to blow the box offices out of the water, make an absolute killing and I'm looking forward to the buzz 🙂

Positions

15k shares at $28.50. Target is $65 within a year when the market wakes up and realizes how incorrectly they've been pricing PARA. Stop loss: What's a stop loss? I'm not selling if it dips to $25, I won't sell if it dips to $15…I won't even sell if we get a black swan event and it dips to $5. I will buy more. I will buy 5k shares every $5 drop. This entire write up has felt very DFV'ish (minus the short squeeze aspect) as I sit here and back a company I believe is being mispriced in a big way for whatever reason and am playing the long game believing the reversion back to the mean will happen. DFV was banging on the table about GME for about a year and a half before the actual squeeze happened. He spent a lot of time getting shit on by you degenerates, so please, go easy on me. lol

TL:DR

PARA is undervalued amongst it's peers and is growing in streaming like crazy rn and in the next few years. I believe they are getting valued incorrectly solely on their legacy cable side and getting nothing for all their intangibles which they could sell multi-billions if they wanted to. All that content coming in house, plus big blockbuster films coming out – and a potential buy out target. Sitting on low lows. Big upside potential.

*Disclosure: Purple crayons taste best. Not financial advice.

Submitted May 14, 2022 at 11:59PM by RichMiserable6093
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