'Star Trek' Licensing Deal To Help CBS Live Long And Prosper, But UBS Still Says Sell

CBS Corporation (NYSE: CBS) reported its second quarter results on Thursday which came in better than expected. However, Doug Mitchelson of UBS maintained a Sell rating on the company with a $52 price target.

Mitchelson stated in a note Friday that CBS' earnings beat was due to content licensing; however, second quarter advertising revenue at CBS Network was just 2 percent – short of the 5.5 percent expectation.

Affiliate revenue was in line with expectations despite CBS' over-the-top video service, All Access, beating expectations with over 2 million subscribers – half a million more than expected. Over the top (OTT) means delivering film or TV content via the Internet without requiring a cable subscription.

Looking forward, Michelson stated that the network's "Star Trek" licensing deal with Netflix will add about $80 million (or $0.13 per share) of content profitability to his forecast. As such, the analyst raised his 2016 earnings per share estimate by 4 cents to $4.03, but 2017's estimate remains unchanged at $4.32.

However, the analyst also cautioned that CBS' ratings for its new programming slate is "crucial" for the company. In addition, it is not clear why its All Access service is booming, yet not driving revenue ahead of expectations.

Finally, CBS's management did not comment on Viacom-related merger speculation, but will remain a "key topic" through the end of the year.

Bottom line, CBS' stock is already trading at a 9.7x EV/2016 estimated EBITDA, which is a premium to the sector's average multiple of 9x.