UPDATED with closing price. Shares in CBS, after two straight days of setbacks that cut their value by 11%, re-entered positive territory amid a broader market rally, rising nearly 3% to close at $52.67.
And yet, even as investors seemed to calm their nerves about the sexual misconduct allegations facing CEO Leslie Moonves, several prominent Wall Street analysts are predicting that he will not stay in his job. The CBS Board of Directors yesterday took no action in the matter, saying it would seek outside counsel to investigate it further.
Doug Creutz of Cowen & Co. issued a downgrade on CBS this morning, from “outperform” to “market perform.” He said the episode weakens the company’s position in its battle with controlling shareholder National Amusements. That makes a Viacom re-merger more likely, only with Viacom management running the combined company. Moonves had previously always been penciled in as the No. 1 in any merger scenario.
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“From the perspective of what would be best for CBS and its shareholders, we think the best choice (among a set of bad ones, to be sure) would be for Moonves to step down and immediately be replaced by COO Joe Ianniello,” Creutz wrote. “While this might not seem fair, given that the veracity of the claims in the article have yet to be fully tested, you have to play the hand you’ve been dealt in a way that best protects the company’s interests.”
As to Ianniello’s credentials, Creutz continued, the COO “had appeared to be the presumptive successor whenever Moonves decided to step down; this just accelerates the process. He is respected on the Street as an operator and negotiator; while we think there would be questions about his ability to manage content, he would have an opportunity to prove himself.”
Brian Wieser of Pivotal Research maintained his hold rating on CBS but issued a report this morning lowering his price target to $53 from $55.
“The company will not be viewed by many key industry participants as taking workplace safety seriously without significant action, which we think the Board will realize has commercial consequences, if not legal and moral ones,” he wrote. “Consequently, it seems likely to us that CEO Les Moonves will be eventually removed from his role.”
Wieser added, “Moonves is an outsized figure for CBS, and his eventual absence would produce a leadership vacuum that could impact the business, if only on the margins in the near-term. Beyond what should hopefully be improvements in the ways in which the company operates and diversity in its managerial ranks, the bigger impact is that a recombination with Viacom now seems significantly more likely. Without Moonves at the helm, we think CBS will be less able to persuade investors that it is better off on its own.”
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