Viacom Inc.: Cable Companies are not Dead, Yet

It is a brand new week and it is good to be back to the business of trading stock options. U.S. stocks are starting this week with gains in the green zone as all major market indexes are recording gains. As at 3:00PM EDT, the S&P 500 was up 0.15% to 2,113.30 and the Dow Jones was up 0.29%.

I had a trip back home to visit with my folks over the weekend and I had an interesting insight while on my weekend getaway. While on my trip I was faced with the huge generational gap between relatively young “city folks” like myself who now turn to on-demand content streaming sites such as Netflix for their entertainment consumptions and the more “traditionally-inclined” folks who get their entertainment need from cable company broadcasts.

It then dawned on me that for every “progressive” individual or family who streams on-demand content on SmartTVs and mobile devices, there are exponentially many more folks who still subscribe to cable companies for their entertainment. Hence, I am of the opinion that cable companies are not about to die off because people are ditching their cable for on-demand content streaming services.

I think that rather than seeing the death of cable companies, we are more likely to see a consolidation in the industry; hence, we will start our options trading activity this week with an exploration of Viacom, Inc. stock options.

Viacom (NASDAQ:VIAB) with its market capitalization of 28.28B is one of the biggest entertainment content company in the world. The company connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications, games, consumer products, social media and other entertainment content in 40 languages over 237 channels. The Company operates through two segments: Media Networks and Filmed Entertainment.

Why Are We Looking at Viacom Today?

The shares of Viacom are looking very attractive today as the stock sports a PE of 12.98 compared to an industry average of 18.50. I am impressed with the 1.35% gains that saw the stock rising to a trading price of $70.70, which is 26.95 % away from its 52-Week high of $89.76; hence we can realistically expect a 13% upside potential from the stock in the next six months.

VIAB Chart

The chart above shows how the shares of Viacom have traded within the last one year. You will observe that the stock has traded practically downhill in the first eight months of the last one year before it established a $68 support (green line) that formed the base for a channel in the last four months.

From the $68 support level, shares of Viacom have soared to experience a $72, $74 and $76 resistance ceiling. Interestingly, the bullish momentum is currently in favor of Viacom and we can expect the stock to touch the $72 support as another ascent from the $68 resistance point begins.

How to Trade VIAB Options

I am bullish about the prospects of Viacom Options and I recommend buying VIAB call options.  I strongly believe that shares of Viacom still have a 13% upside potential in the next 6 months; hence, I am buying VIAB calls. The looks VIAB Jun 2015 72.500 call (VIAB150619C00072500) attractive at an asking price of $2.25.

— Daily Option Alerts

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