No single reason for company's 12% drop

It was wholly unsurprising that media stocks were walloped Wednesday along with the broader market — which tumbled to its lowest levels since 1997 — but it was completely unexpected that the long-ailing sector’s chief victim would be Viacom.

Wall Street has been incredibly volatile for months, with the latest sesh’s massive selloff coming mere days after a huge market rally. But there was scant explanation for the bloodletting and Street watchers chalked it up mostly to continued skittishness over recent financial scandals.

Similarly, there was no single reason for Viacom’s dramatic 12% drop. Radio group concerns were cited in some quarters, while others suggested it was just conglom’s day in the box.

Previously, the market hadn’t punished the Paramount and CBS parent like some other big media groups. But the Viacom slide coincides with a creeping suspicion that an advertising rebound may not gel as quickly as conglom prexy Mel Karmazin insists it will.

Still, there’s a lingering sense that Viacom may get its head above the troubled waters sooner than others.

Ringing endorsement

“We believe Viacom should trade at a premium given its healthy free cash-flow growth rate, strong balance sheet, superior assets and management team,” Merrill Lynch analyst Jessica Reif Cohen wrote in a new investors report.

Cohen reiterated a “strong buy” long-term rating on the stock, with a $60-$65 price target on Viacom’s most widely tracked Class “B” shares. But the analyst did note that the share price objective could prove “aggressive” if a second-half ad recovery fails to take shape.

Of particular concern is conglom’s Infinity radio and billboards division, Cohen said, citing Street concern about Infinity’s radio operations lagging the industry.

Analyst caution

Contributing to the gloomy sesh for Viacom was a note by JPMorgan Securities analyst Spencer Wang, who initiated coverage of the stock with a caution that its share price could be inflated. Viacom’s “B” shares closed down $4.91 on the day at $35.79.

Elsewhere in media/entertainment, Vivendi Universal shares shed 9%, AOL Time Warner fell 6% and News Corp. dropped 5%. Sony and MGM each gave back 4%, and Disney lost 2.5%.

Broader market indices matched the media ugliness wart for wart.

The blue-chip Dow Jones Industrial Average coughed up 282.59 to finish the sesh at 8,813.50 — its lowest close in nine months. The broadly structured Standard & Poor’s 500 tumbled 32.36 to 920.47, its lowest level since October 1997 and the technology-laden Nasdaq Composite Index finished down 35.11 at 1,346.01, its lowest close in more than five years, going back to May 1997.

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