It's all relative

Analysts taking look at big picture

Wall Street analysts brought out a flurry of research on sector biggies and their relationships with other industry players last week, with Time Warner Inc., CBS Corp. and Google Inc. among the highest-profile topics of discussion.

RBC Capital Markets analyst Jordan Rohan covered many big entertainment companies in a report that dissected a possible joint venture by the conglomerates to compete with Google's YouTube. "This venture is poised to fail, if it ever gets off the ground," he argued.

Rohan cited four key reasons: "Imitations rarely resonate with Internet thought leaders and consumers," he wrote. He added that a venture ownership structure will likely lead to "conflict and secession." Also, "rebuffing Google is not usually worthwhile," he suggested, adding that finally, the video search capabilities required to reach scale are in Google's hands.

Rohan also had some good news for the entertainment giants. "Google shareholders should brace for a half-billion (dollars) in content license fees to stem lawsuits and convince the big media companies to work with YouTube," he suggested.

Overall, he maintained his $525 price target on Google shares.

Time Warner also created further Street buzz last week as Prudential Equity Group analyst Katherine Styponias upgraded the stock to what she called a compelling "overweight" — the only media giant that can claim that distinction right now, she argued — and put a $27 price target on it.

Styponias cited cable business trends and a possibly higher-than-projected valuation for the upcoming separation of TW Cable as key catalysts for the stock, which broke $21 and hit a multi-year high.

Miller Tabak + Co. analyst David Joyce boosted his price target on CBS Corp. by $4 to $35 last week, saying the stock has slowly but surely climbed to his previous target.

"We believe CBS shares will continue to appreciate, the dividends are likely to continue to increase, a share buyback program is likely in early 2007 and the fundamentals are relatively solid," he said.

Goldman Sachs analyst Anthony Noto focused on the financial implications of the then-expected loss by CBS' outdoor unit of a bus and commuter rail advertising contract in New York, which he estimated to be worth about $100 million in revenue annually.

CBS "will see anemic growth in 2007 as it faces headwinds" from this and other business challenges, Noto argued.
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