While Walt Disney (DIS) gets all the attention today following its big M&A announcement, investors may want to watch media stocks Viacom, Inc. (NASDAQ:VIAB) and Discovery Communications Inc. (NASDAQ:DISCA). That's because both will be removed from the Nasdaq-100 Index (NDX) next week, and data from Schaeffer's Senior Quantitative Analyst Rocky White shows that stocks have historically outperformed after being booted off the index. Below, we'll take a quick look at shares of VIAB and DISCA to see how they're trading going into 2018.
Starting with Viacom, the MTV parent has dropped almost 17% in 2017 to trade at $29.18. The shares have bounced nicely since hitting an eight-year low of $22.13 on Nov. 16, but the round $30 level has stepped up as short-term resistance. Interestingly, this price point nearly aligns with the equity's average 12-month price target of $30.98.
Most analysts are understandably skeptical of VIAB. There are 31 brokerage firms tracking the security, and just nine of them say it's worth buying. So if next year does bring some upside to Viacom, the door is at least open for bullish analyst attention.
The media stock has also seen a steady rise in short interest in 2017, with these positions now accounting for 8.4% of its total float. Based on average daily volumes, it'd take these bears essentially one week to cover their positions, hinting at a potential source of buying power that could come in and help the shares rise.
The chart for Discovery Communications looks a lot like VIAB's, with the Animal Planet owner sliding 28% for the year and touching a multi-year low of $15.99 on Nov. 15. The stock has recovered some to trade at $19.92, but is struggling to overcome its downtrending 80-day moving average.
Analysts don't have high expectations, either. Of the 17 that provide coverage, just three have handed out "buy" or "strong buy" recommendations. And the average 12-month price target of $22.08 suggests slim expectations for upside.
Elsewhere, short interest hit the highest point on record in October for DISCA stock. Short interest currently represents 10% of its float, and it would take short sellers six sessions to cover these positions, based on average trading volumes. All this being the case, there's plenty of negativity that could unwind and result in tailwinds for the security, if it can find its footing on the charts.