Argus Downgrades CBS On Moonves Risks

CBS Corporation CBS has successfully stood out as a success story in an era of cord-cutting, but allegations of sexual misconduct against CEO Les Moonves and a legal battle with the Redstone family makes it difficult to hold a bullish stance, according to Argus. 

The Analyst

Argus' Joseph Bonner downgraded CBS from Buy to Hold with no assigned price target.

The Thesis

CBS remained a dominant player in TV over the years as the company shifted away from the secularly declining and volatile advertising revenue stream toward new revenue sources like retransmission, content licensing, direct-to-consumer streaming and the international market, Bonner said in the downgrade note. (See the analyst's track record here.) 

The company now faces two notable risks moving forward, the analyst said:

• The allegations against Moonves are serious — although not yet proven — that, if accurate, they would result in his termination, Bonner said. Viacom, Inc. VIAB CEO Bob Bakish would likely replace Moonves, he said. 
• Moonves' potential dismissal could mark an end to CBS' board fight with the Redstone family, which also owns a controlling interest in Viacom, Bonner said. In the event the battle is called off, a merger between CBS and Viacom is a clear negative for CBS' minority shareholders, he said. 

Price Action

CBS shares were up 1.1 percent at $53.43 at the time of publication Tuesday. 

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CBS CEO Les Moonves with his wife Julie Chen. Photo by David Shankbone/Wikimedia.