CBS Gains as TV Ad Dollars Rise

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Major advertisers are still stick with TV despite fears that ad dollars are rushing to the web. This bodes well for companies like CBS' ( CBS ) as well as its rivals like Disney ( DIS ), News Corp. ( NWS ), Time Warner ( TWX ) and Viacom ( VIA ). Below we take a quick look at the findings and CBS's dependence on TV advertising.

Our price estimate for CBS stands at $27.50 , implying a slight premium to the market price.

TV Advertisement Picking Up

According to a recent report in WSJ citing ad-buying firm Intergroup, TV advertisement spending will increase by 3.3% in 2011. This is higher growth compared to overall expected growth in advertising spend, which is likely to be about 1.6% in 2011 according to same firm. This implies that TV will gain market share in total advertising market. The research firm expects this share to be about 34% in 2011 and forecasts it to increase to 38% by 2016.

CBS Benefits, and Others

Media companies like CBS depend heavily on advertising revenue. CBS, for instance, earns TV advertising dollars for its CBS network and local TV stations. We estimate that value dependence of CBS on TV ad dollars lies somewhere at 30% of the total. Therefore the news that TV advertising is growing at a healthy pace holds bright prospects for media companies like CBS, who depend heavily on this revenue stream. You can modify the forecast below to see how increase in ad revenues from local TV stations can benefit CBS.

See our complete analysis for CBS' stock

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets
Referenced Symbols: CBS , DIS , NWS , TWX , VIA

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