CBS's Big 'GARP' Opportunity

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Deutsche Bank’s Bryan Kraft maintained a Buy rating for CBS Corporation CBS, while raising the price target from $60 to $64, after the company revealed that it is aiming for highly aggressive 5-year growth targets.

CBS’ investor day revealed that the company aims to generate growth by exploiting the opportunity to effectively monetize traditional pay TV bundle through growth in retrains/reverse comp and prosper outside its traditional bundle through direct-to-consumer and smaller channel bundles.

Analyst Bryan Kraft believes that the company can also aim for growth in Showtime’s international revenue and profits via its new licensing strategy.

Aggressive Targets By CBS

Management quantified the 2020 forecasts for these revenue pools and indicated that it aims to generate 2020 revenues that are $3.7 billion more than the 2015 levels. Kraft said that international licensing and domestic retrains/reverse are the major contributors to this upside.

“In addition to adding more growth in 2018-2020 for retrans and international licensing, we’ve made some granular changes to 2016 and 2017, including the addition of estimated costs for NFL streaming rights, fewer shares repurchased because CBS’ stock price is higher, and other tweaks, the Deutsche Bank report noted.

CBS is in the early stages of exploring strategic options for its radio business. The analyst added that these options include an IPO or sale through a Reverse Morris Trust.

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Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasBryan KraftDeutsche Bank
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