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Wall Street cautious on ViacomCBS deal; Roku plunges on downgrade

Shares in the newly minted ViacomCBS Inc. tumbled during the week ended Dec. 6 as analysts considered the benefits of the recombination, while Roku Inc. shares fell after an analyst expressed concerns that the company is overvalued.

CBS Corp. and Viacom Inc. reunited after market-close Dec. 4, following their split over a decade ago. The merged company began trading on the Nasdaq Global Select Market Dec. 5 under the new ticker symbols VIACA and VIAC.

Viacom and CBS had considered a deal several times over the past few years, but those attempts were hindered by a slew of legal battles and executive shake-ups.

While executives said the $12.2 billion all-stock transaction will provide more scale for ViacomCBS to compete in an evolving media landscape, some analysts voiced a slightly less optimistic view of the deal.

Credit Suisse analyst Douglas Mitchelson wrote in a recent research note that the merger should remove some of the "uncertainty" hanging over both companies. However, Mitchelson said he is unsure about whether the details management provided around the deal's synergies will be enough to attract new investors.

ViacomCBS estimated the merger would create $500 million in annualized run-rate synergies within a year or two of closing.

Bernstein Research analyst Todd Juenger also expressed concerns about the tie-up, saying in a recent report that CBS has much to lose by linking up again with Viacom — a company he described as struggling to keep pace in a media landscape being transformed by new streaming options.

The new ViacomCBS was trading at $40 per share around midday Dec. 6, down 2.10% from its prior-day close and first day of trading.

Meanwhile, Roku shares cratered this week after Morgan Stanley analyst Benjamin Swinburne cautioned that the company's rapid growth during 2019 leaves it vulnerable to unforeseen risks.

Swinburne in a Dec. 2 note lowered his rating on Roku's stock to "underweight" from "equal weight," saying the company's solid performance this year could prove difficult to maintain.

"Specifically, we think [Roku's] revenue and gross profit growth [will] slow meaningfully in 2020 and the multiple compresses," the analyst wrote.

Around midday Dec. 6, Roku stock was trading at $146.11 apiece, down 8.89% from its Nov. 29 closing price.

Apple Inc. shares also dipped but recovered slightly by the end of the week after U.S. President Donald Trump indicated that trade talks between the U.S. and China could be delayed until after the 2020 U.S. presidential election.

Speaking to reporters in London during the NATO summit this week, Trump said he had "no deadline" to ink a trade deal with China.

Wedbush Securities analyst Daniel Ives said Trump's latest comments add a new layer of uncertainty for Apple, which has been caught up in the ongoing trade spat between the two countries.

The Trump administration in August delayed imposing $300 billion of tariffs on certain goods assembled in China, including Apple's cellphones and laptops, until Dec. 15. The tariffs previously had been set to take effect Sept. 1.

But Trump's latest comments "add fuel to the fire" ahead of the looming Dec. 15 deadline and paint a "dark cloud" over Apple and semiconductor companies that maintain key operations in China, Ives said in a research report.

Apple shares dropped immediately following Trump's comments, but rebounded, trading up 1.31% midday Dec. 6, at $270.74.

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