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CBS stock remains top buy, with big growth levers

CBS is the top stock to own in media, Citigroup analysts say, believing that Wall Street is ignoring upside opportunities for the company.

CBS All-Access logs 100K+ subscribers

CBS All Access has logged notable growth since launching as an over-the-top (OTT) service in October. It has more than 100,000 subscribers to date.

HBO plots standalone streaming service with Apple TV

HBO is reportedly prepping a standalone version of its HBO GO TV everywhere app, tentatively entitled HBO Now—with Apple TV and others reportedly in talks to carry the service. If so it'll be a direct shot across the bow to Netflix—and a turning point in its relationships with traditional pay-TV provider.

Media Analysis

OTT video quests for special treatment via 'managed service' status

The FCC may have recently issued its Open Internet Order reaffirming Net neutrality regulation, but HBO, Showtime and Sony are reportedly looking for a loophole. The trouble is, it's unclear what that loophole consists of.

Apple TV's new pricing, HBO Now not enough to maintain competitiveness

Apple may have dropped the price on its Apple TV set-top streaming gadget, but it has a long way to go to shore up its competitive position.

AMC books double-digit growth for Q4

AMC Networks has sailed to double-digit gains in revenue on the back of strong domestic advertising growth and international success.

Media Investment

Netflix flips the script on film production financials

Netflix has dove headlong into acquiring the rights to original movies in the last few months, but its deal-structuring with producers and a refusal to pay a percentage of box-office proceeds is shaking up the industry status quo.

FCC halts mega-merger reviews, releases Open Internet order

Just as it releases details of its Net neutrality order to reclassify broadband as a public utility, the FCC has once again paused its informal 180-day countdown clock for deciding whether or not a pair of pending mega-mergers—Comcast/Time Warner Cable and AT&T/DirecTV—will be approved.

Basketball viewership is young and diverse

When it comes to sports, ethnicities among US viewers tend to correlate to certain events. The 2013-2014 season was no exception, with Nielsen showing that multicultural audiences spent more time watching NBA games on TV compared to white viewers.

CBS stock remains top buy, with big growth levers

Michelle Clancy

CBS is the top stock to own in media, Citigroup analysts say, believing that Wall Street is ignoring upside opportunities for the company.

Consensus forecasts call for EPS growth at the Tiffany Network to fall by half, from about 20% in 2015 and 2016 to just 10% in 2017 and 2018. Wall Street is ignoring upside for the stock, with analysts forecasting top-line growth akin to inflation (~2%) and flat to declining margins.

But Citi points out that CBS has at least five growth levers: Showtime OTT, CBS All Access, re-transmission revenues above company guidance, TV Everywhere streaming rights, and new OTT video entrants such as Sony and Apple.

Consider, for instance, management's outlook for retransmission and reverse compensation. The network said that it expects to gain $1 billion in carriage fees in 2017 and $2 billion in 2020.

It's also working on its advertising revenue options, introducing a data-driven approach for analysing and buying time on broadcast television, dubbed Campaign Performance Audit, or CPA. 

It offers performance-based metrics to maximise advertisers' network television spend. CBS has been testing the approach with select advertisers since last autumn. Advertisers gain access to CBS's research facility, Television City, where they can test the effectiveness of messages. And, CPA employs a full complement of Nielsen analytics, including Nielsen Catalina Solutions, Nielsen Buyer Insights, Nielsen MotorStats, Nielsen MRI Fusion, Nielsen Brand Effects and Nielsen Cambridge Media Demand Landscape.

On the digital front, CBS has gone all-out with the launch of CBS All Access. It has logged notable growth since launching as an over-the-top (OTT) service since launching as an over-the-top (OTT) service in October. It has more than 100,000 subscribers to date, attracting users "beyond our projections" and doing "extremely well."

CBS All Access, which costs $5.99 per month, is attracting cord-cutters and has been especially successful with its news content, he said. He also mentioned that it may offer pay-per-view (PPV) content around concerts or other special events going forward.

Network honcho Les Moonves also said that he expects Showtime to debut an OTT offering "in the not too distant future" that would mirror HBO Now's value prop—functioning as a standalone option for the premium cable net.

And, CBS is at the forefront with Sony PlayStation Vue, which became available this week in New York, Chicago and Philadelphiathis week in New York, Chicago and Philadelphia, starting at $49.99 per month. The service includes 85 channels and a number of local network partners. But CBS is the only national network to feature on the platform so far.

Apple is also reportedly plotting an OTT offering,an OTT offering, which will cost between $30-$40 per month at launch, and offer content from a number of broadcasters, including CBS. It will run on the iPhone, iPad and an upgraded version of the Apple TV box.

Taken together, CBS is on a roll, expanding not only its core revenue possibilities as well as its digital footprint. As a result, Citi raised its target price on CBS to $72 from $60, or 15 times its 2016 EPS estimate of $4.52, plus a bit more for M&A possibilities.