CBS-Apple Partnership? Jefferies Likes It (For CBS)

In a report published Thursday, Jefferies analyst John Janedis maintained a Buy rating on CBS Corporation CBS, with a price target of $68. Showtime is all set to launch its OTT offering in early July. The first distribution partner, albeit on a non-exclusive basis, is Apple Inc. AAPL. The price is at $10.99 per month and the offer represents "better economics than the current pay-TV model." Analyst John Janedis estimates that every 1M Showtime OTT subscriber will contribute at least $0.13 to CBS' earnings and generate 28-37 percent higher revenue than the existing MVPD subs even with significantly higher EBITDA. In the report Jefferies noted, "We see the Showtime OTT offering as largely accretive to the existing subscriber base, as opposed to cannibalistic. A Showtime OTT offering allows the network to tap into 10M broadband only homes, which currently do not have access to a Showtime offering, and further penetrate another 80M pay TV homes that are currently note subscribers." Since the deal with Apple is not an exclusive one, CBS may announce other partners in time, like Amazon.com, Inc. AMZN.