CBS: Recession on Advertising Over?

CBS Corporation (NYSE:CBS) had its CEO boldly suggest the advertising recession has ceased receding, which lifted the financial prospects of the company and drove its stock up over 26% percent today on BIG volume.

Wall Street analysts also hiked price-targets to increase the stock price.  Analysts included JPMorgan, Jeffries & Co. and Morgan Stanley.  A bullish day for equities in general also helped bring the stock up, with the Dow Jones notching 2009 highs. Morgan Stanley's Benjamin Swinburne wrote in a research note that his firm has "increased confidence" in the ability of CBS to generate free cash flow and use it to pay down debt, which would increase the value of the company's equity. The firm thus hiked its price target on CBS to $10.

CBS shares surpassed that $10 level today. In afternoon trading, the stock was changing hands at $10.74, up $2.20, or nearly 26%, on volume of 42 million shares, more than triple the daily average.

In the company's earnings report, issued after the stock market closed Thursday, Moonves said, "We continue to believe that the back half of the year will be considerably stronger than the first."

Moonves also suggested that the worst might be over: "As we anticipated, early signs of a recovery took hold in the second quarter, and our revenue, profit and EPS trends were all better than in the first quarter."

But the company's second-quarter results were painful to look at. CBS reported the numbers after the bell Thursday, showing a 96% decline in its second-quarter profit from a year ago.

Still, as profound a drop as that was, Wall Street was expecting it, and investors appeared to shrug off the recent past with ease, choosing to believe that CBS will see ad revenue return to TV programming, from which the company more than 60% of its business.

According to Morgan's Swinburne, this makes CBS a "levered investment on an advertising recovery in 2010." In the shorter term, he added, "CBS' network ratings leadership gives us confidence CBS can gain advertising share versus its broadcast competitors this coming season."