Guggenheim Raises CBS Price Target On Multi-Year Growth Outlook

CBS Corporation CBS provided updated guidance, reflecting combined direct-to-consumer subscribers of 25 million by 2022, high-single-digit revenue CAGR over the next three years and strong content investment in the first half of 2019.

Moreover, around 70 percent of the company’s linear subscriber base will be due for renewal over the next couple of years, according to Guggenheim.

The Analyst

Guggenheim’s Michael Morris maintains a Buy rating on CBS, raising the price target from $56 to $57.

The Thesis

CBS All Access and Showtime OTT achieved their target of 8 million combined subscribers nearly two years earlier than anticipated. Management raised the target for 2022 from 16 million to 25 million combined subscribers.

The latest projections don't include the company’s international or ad-supported channels such as ET! Live and CBS Sports HQ, Morris noted.

Management cited increased investment in content production and licensing as the next leg of its strategy. The company is already producing 76 series, with 11 All Access originals; and Showtime is expected to achieve 30 percent growth in original hours in 2019.

CBS seems “fundamentally stronger” than what its valuation reflects, especially considering its outlook beyond 2019, Morris said.

Price Action

Shares of CBS dipped slightly to trade at $50.60 on Tuesday.

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