) competes with other media conglomerates like Disney (
), News Corp. (
), Time Warner (
) and Viacom (
) in the media and entertainment business. The company recently
released its Q4 2010 earnings and based on observed improvements in
margins across all categories, an improving advertising environment
and continued growth in the local broadcasting segment, we have
updated our price estimate for CBS stock to
. Our price estimate for CBS stands at 18% premium to the market
One of the key aspects of the improvement according to CBS was
its content. While there has been general improvement in the
advertisement marketplace helping all the media companies out
there, having better content gives the company better negotiating
power for higher
Content is King as Ratings Improve
CBS has observed higher ratings for many of its shows and is
also seeing improvement in content licensing due to growth in
international markets. The prime reason behind this, as the company
states, is the quality of their content. CBS mentions during its
Other that that, NFL average viewership got a significant boost
reaching its highest in 23 years, thus aiding ad prices.
Additionally the Grammys had its highest viewership in 10 years of
to 26.5 million viewers. Thus it seems that CBS ratings are doing
well with the help of its content.
What This Means For CBS?
CBS' entertainment division, which has been benefiting from the
above mentioned trend, primarily includes the CBS network division
and TV licensing. We estimate that CBS network constitutes about
15% to the company's value while TV licensing adds another 13%
approximately. Thus, positive trends affecting almost 30% of CBS'
value are meaningful for its share price. Good content implies
better ratings, which directly aids advertisement revenues and
You can modify our forecasts above, as well as
TV licensing revenue
forecast below, to see how the key drivers that are being affected
by these positive trends play out in terms of their impact on CBS'
the complete $26.34 Trefis price estimate for CBS'