Analysts Not Buying CBS-Viacom Merger

CBS and Viacom recently announced plans to combine

Yesterday, CBS Corporation (NYSE:CBS) announced an agreement to merge with Viacom (VIAB) in an all-stock deal, creating an entity -- ViacomCBS -- with more than $28 billion in revenue. Today, analysts weighed in on the deal, with Bernstein downgrading CBS stock to"underperform" from "outperform," while cutting its price target to $46 from $62. The analyst in coverage called the merger a "shame," and bemoaned the fact that CBS now has to take on Viacom's structural problems.

Elsewhere, BMO Capital cut CBS stock to "market perform" from "outperform," while trimming its price target to $51 from $60. Three other brokerages chimed in with price-target cuts, including to $57 from Citi, which cautioned that CBS must take bolder steps to benefit from the expansion.

All of this analyst attention has CBS stock down 5.5% to trade at $46.02 this morning, set for its lowest close since March. CBS gained 1.4% yesterday when the news broke, but is now set to breach a trendline connecting higher lows since December. Year-to-date, the shares are now up 5%.

Prior to this week, the analyst setup had leaned bullishly. There are 19 brokerages covering CBS, and 13 rate it a "buy" or "strong buy," with zero "sells" on the books. Plus, the security's consensus 12-month price target of $60.01 is a 23% premium to last night's closing perch at $48.70.

In the options pits, traders have been focused on calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 2.04 indicates calls have outnumbered puts by a 2-to-1 ratio in the last two weeks.

Plus, short-term options are relatively cheap at the moment. This is according to the stock's Schaeffer's Volatility Index (SVI) of 24%, which ranked in the bottom 16th annual percentile.