Why Key Analyst Sees Value in This Media Giant

By Trey Thoelcke Updated Jan 13, 5:15PM EST · Published Nov 12, 11:40AM EST

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Why Key Analyst Sees Value in This Media Giant — © Wikimedia Commons

In a weekly research report, Jefferies looks for stocks it considers to be compelling values at current levels. These picks make sense for growth investors looking to stay long the markets, but wanting to rotate out of high beta or momentum companies. And twice in the past month Jefferies has picked CBS Corp. (NYSE: CBS) as a value stock to buy now.

It has not been a particularly good year for some of the country’s biggest media firms. Only a couple of them have managed to eke out a share price gain, while most have experienced a sharp drop in their share prices.

What’s happening is that the cable and satellite providers are losing subscribers, which means that they are likely to be unwilling to renew their contracts with the media companies at the rates they have been and are now paying.

While it too has taken a beating this year but has bounced off the lows, CBS may be in the best position of all the broadcast networks. With an outstanding prime time lineup, solid sports franchises like the NFL, March Madness College Basketball, The Masters and other top programming, the venerable network could once again be an outstanding stock for shareholders.

The company is leading again in the fall ratings, and it is poised to continue the network’s programming dominance in 2016. The broadcasting giant is now in the midst of a significant stock repurchase process, and many on Wall Street expect CBS to shrink its share base by 25% over the next two years.

Jefferies points out that network advertising and strong content licensing revenue drove the upside in the third-quarter earnings, which beat consensus estimates despite a slight revenue miss. Similar to the broadcasting giant’s rivals, many analysts expect CBS to look to book content licensing more evenly over the year and into 2016. And trading at around 12 times 2016 estimated earnings, the stock is cheap.

CBS shareholders receive a 1.25% dividend. The Jefferies price target for the stock is $62. Shares closed Wednesday at $50.31 and were up fractionally in Thursday morning trading.

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.