One securities firm Monday downgraded CBS and Viacom stock from "buy" to "neutral" based on the weakening national advertising market on top of the already weakening local ad market.
Wunderlich Securities says it downgraded CBS and revised the stock price target form $12 per share to $7 per share due to a weakening scatter market (2008 networks ads not pre-sold) and an anticipated buyers market for the 2009 upfront (pre-sold ads for the 2009-2010 season), as well as its particular exposre to ad-related fluctuations.
Wunderlich predicts a 14.8% decline in total revenue for CBS in 2009 and recommends that its clients "stay on the sidelines" until there is an ad rebound.
Viacom's downgrade is also driven by the declining ad market, with Wunderlich analysts Martin Pyykkonen saying that cable channels like MTV, VH1 and Nickelodeon will face a similarly "challenging" ad market for "the foreseeable future."
Pyykkonen's downgrade came just two weeks after saying Viacom was still a buy--coming off its third-quarter earnings--though dropping the price target from $32 to $25.
Monday, Pyykkonen slashed the target to $16 per share, or half what it had been only three weeks ago.
At press time, Viacom's stock was trading at $15.71, down $1.07 from Friday's close. CBS was trading at $6.35, down 27 cents.