Sizing up '07

Analysts measuring industry stocks

With 2006 having reached the home stretch, it's time for Wall Street observers to make the year's final adjustments to their financial models and start picking stocks for 2007.

In that spirit, Bear Stearns' team of entertainment analysts on Thursday lowered its sector rating from "market overweight" to "market weight," citing a strong 22% run-up in sector stocks year-to-date, twice the S&P 500 index's gain, and several trends that will "limit sector outperformance in 2007."

First, in the digital world, "incumbent creators of content will see slowing growth and market share losses to user-generated content over the long run," Bear Stearns analyst Spencer Wang argued. He also predicted a renewed cycle of mergers and acquisitions as well as an acceleration of advertising spending shifts to digital platforms.

Wang maintained his "overweight" rating on Viacom Inc. as his favorite sector biggie "as we believe lackluster share performance in 2006 provides ongoing compelling valuation."

Ahead of two big conferences organized by UBS and Credit Suisse in New York this week, some other analysts also shared their latest thoughts on various stocks.

Merrill Lynch analyst Jessica Reif Cohen raised her price target on CBS Corp. by $3 to $36, saying it "remains inexpensive."

Meanwhile, Goldman Sachs analyst Mark Wienkes maintained his "neutral" rating on shares of broadcaster Emmis Communications, saying continued revenue declines and a recent dividend payment "will prevent any tender offer or stock price appreciation in the near term."

Based on this, however, he lowered his price target to $7.50 from $11 on Emmis.

He also dealt a blow to shares of Spanish Broadcasting System, saying investors should sell them "despite the company's mention of the potential for a privatization." Wienkes cited "execution and investment risk related to an uncertain foray into the television business in Miami, higher leverage and limited free cash flow." He lowered his price target on Spanish Broadcasting to $4 from $4.50.

Citigroup analyst Eileen Furukawa also struck bearish tones on radio stocks, mainly potential station acquirers Cox Radio and Cumulus Media, which she downgraded to "sell" status.

Calling Cox Radio the "most speculated" buyout target, she said a deal for the firm would be too pricey after a stock run-up this year. And Cumulus has "strong fundamentals," but the stock "may be overextended for now, she said.
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