Jim Cramer has a hard enough time trying to figure out the trajectory of a stock when it isn't a battleground. But with Viacom, there are simply too many questions.
Who is running the company? Who will be fired? Who is really on the board? Is Sumner Redstone capable of running the company?
"Sometimes there is just no good way to value a stock. That is how I feel about Viacom," the "Mad Money" host said.
Cramer found the earnings just as puzzling. In an update on its June quarter financial expectations on Friday, Viacom reported that it only expects to earn between $1 and $1.05 a share for the third quarter of 2016. This was below the $1.38 per share expected by Wall Street.
I say stay away, it is just too crazy, too murky, and way too hard to put a price tag on this soap opera's outcome.Jim Cramer
When Cramer looked at its schedule of films for release, nothing stood out to him as a possible cash cow.
The "Mad Money" host also heard rumors that Viacom could be taken over, possibly due to the Redstone family selling the company. But there was nothing to confirm this, and there was no intel on what the family plans to do.
"If Viacom gets a takeover bid, then it's a win; if it doesn't, then you need real management to organize a turnaround in the fundamentals, and I have no idea how long that will take," Cramer said.
That is why Cramer reached the conclusion that while the stock is cheap at current levels, it could be a value trap. He simply does not have the ability to make a judgment on it.
One of the oldest rules in Cramer's book is that he will never recommend a stock on a takeover basis if the fundamentals are in a decline. The press release from Viacom on Friday confirmed that is the case.
So, for those who want to speculate on the stock, Cramer's not blessing it. He may have missed a few takeovers in his career, but he has also avoided losing much more money by taking the risk.
"I say stay away, it is just too crazy, too murky, and way too hard to put a price tag on this soap opera's outcome," Cramer said.
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