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Morgan Stanley: CBS Stock Appears Too Cheap

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Morgan Stanley: CBS Stock Appears Too Cheap

As the world moves to a new media landscape, the stock price of one old media stalwart that looks well-positioned to make the transition appears too low, Morgan Stanley said Wednesday in an update on CBS Corporation (NYSE: CBS).

The Analyst

Morgan Stanley’s Benjamin Swinburne lowered his price target on CBS from $60 to $58, while keeping the stock rated Equal-Weight.

The Thesis

Given strong earnings growth, CBS shares appear too cheap, Swinburne wrote in a note.

The reasons investors aren’t valuing CBS higher, he says, include questions about who will lead the company, ongoing uncertainty over a long-speculated potential merger between CBS and Viacom, Inc. (NASDAQ: VIAB), and CBS's growing investments in content.

"Ultimately, all this content spend will show up on the income statement as it is brought to market and we believe may lead to lower margins than consensus is expecting," Swinburne wrote.

Investors also are jittery because of the leadership question at CBS, which is expected soon to finalize a replacement for former CEO Les Moonves, fired last year amid sexual harassment allegations.

Clearing up some uncertainty around Viacom and leadership questions would help, Swinburne wrote. The rising capital intensity, however, merely reflects the new landscape in media.

But, barring a recession that cuts ad revenue, Morgan Stanley is comfortable with CBS's revenue and earnings guidance, and is raising its annual growth rate estimate for the TV company to 6-7 percent over the 2019-2021 period.

Morgan Stanley sees CBS as one of the best-positioned companies for navigating changes in the media and TV bundle ecosystem.

Price Action

CBS shares were trading up 2.1 percent at $48.95 on Wednesday.

Related Links:

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Photo by ViperSnake151/Wikimedia. 

Latest Ratings for CBS

DateFirmActionFromTo
Feb 2019DowngradesOverweightNeutral
Jan 2019UpgradesNeutralBuy
Jan 2019UpgradesEqual-WeightOverweight

View More Analyst Ratings for CBS
View the Latest Analyst Ratings

Posted-In: Benjamin Swinburne Les Moonves Morgan StanleyAnalyst Color Price Target Analyst Ratings Best of Benzinga

 

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