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Viacom stock eclipses Eye

CBS slows down while conglom makes way on Wall Street

Two weeks after they detached, CBS’ little engine that could is slowing down — while Viacom just keeps chugging along.

After an opening week in which it outpaced its former sibling, CBS’ value dropped 6% last week to close at a two-week low of $25.48.

Meanwhile, after a poor start to the week, Viacom closed strong, at $42.14, and is now up more than 5% since it began trading.

CBS’ slide happened in a week when many congloms, such as Sony, Disney and News Corp, saw gains of 5% or more.

And at least one expert is predicting more bad news.

On Wednesday, one of the first major analyst reports on CBS handed it a dismal judgment. Goldman Sachs’ Anthony Noto wrote: “We expect CBS Corp. to underperform our entertainment coverage universe given the combination of its weak fundamentals, unfavorable themes and our implied value of $21.”

Noto advocated a sell, and the market obliged by dropping CBS 4% in the following two days. Overall, CBS is down 2% since it began trading on Jan. 3.

But many of Noto’s worries, such as those about a possible decline in commercial radio and an ad market weakened by TiVo, are perennial concerns unlikely to ruffle investors.

Noto also praised CBS’ content, noting that the web currently airs seven of the top 10 shows and has the highest number of total households for the fifth consecutive year in 2005. But he suggested popularity could be a curse, as it was for ABC in the aftermath of net’s “Who Wants to Be a Millionaire,” and said the network was “near peak profitability” given some of its longer-running skeins like “CSI.”

Noto’s CBS report contradicted the assessment of Prudential’s Katherine Styponias, who was far more optimistic when she pegged a target price at $30 two weeks ago.

While in the short term CBS’ stock price won’t matter to the entertainment biz, over a longer period it could force the company to shed underperforming assets.

Noto was far kinder to Viacom. In a second report, he rated the stock outperform and set a target price of $50. He described Viacom and Disney as two companies well positioned for a shift to digital delivery and said Viacom would continue to benefit from increased coin in cable advertising.

Wall Streeters are also quick to emphasize volatility of both stocks, given that the companies have not yet embarked on road shows, which are scheduled for the end of the month. Those presentations could bring in more long-term investors, as opposed to the short-term investors thought to be involved now.

Volume did begin to slow down at both CBS and Viacom at the end of last week, suggesting the stocks may be entering a more stable period.

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