CBS (NYSE:CBS) cable networks are the most profitable business for the company, especially Showtime that boasts profit margins of around 40%. The company recently released its Q2 earnings that reflected continued growth in its cable networks subscriptions and confirmed the importance and stability of this business. CBS competes with other media conglomerates like Disney (NYSE:DIS), News Corp (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom (NYSE:VIA) primarily in the TV and publishing business.
Our price estimate for CBS stands at $33.50 implies a 35% premium to the market price.
Showtime Networks account for almost one-fifth to CBS’ stock value according to our estimates. Additionally, it provides a hedge against economic uncertainty because cable subscriptions tend to remain stable even when advertisement revenues get hammered during recessionary times.
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CBS stated during its recent earnings announcement that original series are helping propel Showtime’s growth, and the company expects the momentum to continue for many of its new and returning shows. 
Content licensing revenues are also demonstrating impressive growth apart and are being driven by new deals such as streaming agreements with companies like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN). This provides anther leg of growth that is less dependent on ad spending.
In short, the company’s earnings underscored some positive developments such as profit margin growth, new revenue streams and less volatility from the business cycle.Notes: