Wall Street is so driven by groupthink that I have to take my hat off to Bernstein Research’s Todd Juenger for sticking to his guns this morning about CBS. He’s one of the lonely few analysts who’s neutral about the company’s stock; 21 have a “buy” vs five who have a “hold”. That made him the wallflower at the CBS party: Its shares have appreciated 97.5%, well ahead of the benchmark Standard & Poor’s 500’s 32.7% in the period since late February 2012 when Juenger initiated his coverage with a “market perform” recommendation. The analyst says that he feels like someone who looks at the Mona Lisa and says “Eh, that’s a nice painting.” So why doesn’t he join the pack? He believes that “upside operating scenarios for CBS are either exhausted or fully baked into the stock, but downside risk remains.” Take retransmission consent. He underestimated how quickly the company would collect those fees from pay TV distributors. But now the revenues are “solidly built into expectations.” Showtime grew faster than he anticipated, but he wonders: “How much longer can it keep growing at the same pace?” And CBS’ ratings success could become a problem. “As the #1 network, there will always be the risk of ratings decline, no matter how good CBS’ track record. …There is always some chance the U.S. will wake up one day and no longer be interested in NCIS or CSI. We’re not saying that’s likely. But it is always a risk.” The analyst is concerned that revenues from streaming services led by Netflix could decline. CBS’ serialized dramas don’t “seem particularly well suited for SVOD platforms” although he wonders whether old episodes of Star Trek are “so valuable to Netflix that they’re willing to buy everything else” to get them. Then there’s Aereo, which Juenger calls “the risk that won’t go away.” Even if the courts agree with CBS’ view that the streaming service that taps free, over-the-air signals infringes on broadcasters’ copyrights “we believe dozens of of entrepreneurs (and Aereo itself) will pop up in a matter of months with a new design work-around and the process will start all over again.” Bottom line: Juenger sticks with his $60 price target for CBS, which closed yesterday at $59.70.
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