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We have maintained our long-term Neutral recommendation on CBS Corporation (CBS - Analyst Report) with a target price of $56.00, as risk reward remains fairly balanced at this juncture.

Why the Reiteration?

CBS Corporation is poised to benefit from its strategic expansion initiatives. We expect its growth momentum to continue in 2013 based on reverse compensation from affiliates, strong demand of its content, digital distribution, syndication sales and retransmission consent. CBS is eyeing around $1 billion in retransmission and reverse compensation revenue by 2017. The company also remains positive about CBS Television Network being the growth driver.

Alongside, CBS continues to benefit from its streaming deals. Thus, the company further strengthened its ties with Netflix, Inc. (NFLX - Analyst Report) by extending its multi-year streaming video deal for select library content. Moreover, it entered into a deal with Amazon.com Inc. (AMZN - Analyst Report). These measures facilitate CBS in monetizing its content.

The company also acquired the remaining 50% stake in TV Guide Digital, including the TVGuide.com and TV Guide Mobile properties from Lions Gate Entertainment Corp. (LGF - Analyst Report). The addition of TVGuide.com to CBS’ impressive portfolio is believed to be a major boost for the company’s digital business as both TVGuide.com and TV Guide Mobile enjoy a strong audience in the lucrative TV information category.

Despite the fact that CBS is lowering its dependency on advertising revenue, we believe the company remains extremely vulnerable to the advertising market and operates in a highly competitive industry. Moreover, secular headwinds remain a matter of concern for broadcast-driven media companies.

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