On Nov 27, 2013, we reiterated our long-term Neutral
recommendation on media conglomerate
) with a target price of $61.50. This was based on the company's
strong third-quarter 2013 results along with strategic
initiatives and growth catalysts. However, stiff competition,
adverse currency fluctuations and vulnerable advertising revenues
pose a serious threat to this Zacks Rank #3 (Hold) stock.
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CBS Corporation's sustained focus on increasing subscription
based revenue channels remains a long-term growth driver. We
expect the company's growth momentum to continue in 2013 and 2014
as well based on reverse compensation from affiliates, strong
demand of its content, digital distribution, syndication sales
and retransmission consent.
Alongside, CBS continues to benefit from its streamlining deals.
Significantly, the company strengthened its ties with
) by extending its multi-year streaming video deal for select
library content. Moreover, it entered into a deal with
). These measures facilitate CBS to monetize its content.
Moreover, CBS has been actively managing its cash flow by
generating healthy free cash, making prudent capital investments
and enhancing shareholders' return. The company has been active
in adding diverse revenue streams to hedge against economic
cycles. This is substantiated by the company's expansion into the
fastest growing live gaming and eSports market.
CBS Corp is currently witnessing steady top and bottom-line
growth as evident from its strong third-quarter 2013 results. The
quarterly earnings rose 19.0% to 76 cents a share, while net
sales increased 11.3% to $3,634.0 million.
On the flip side, softness witnessed in the economies of primary
markets poses a serious threat to advertising revenues, the
primary source of revenue for CBS Corp. Further, the highly
fragmented nature of the media industry can weigh its top line
down. Also, with operations in international markets, the company
remains prone to fluctuations in exchange rates.
Other Stocks to Consider
Another better-ranked stock in the media sector includes
), which carries a Zacks Rank #2 (Buy).