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Pivotal Predicts Government Policies Will Continue to Recognize Value of Free TV

Pivotal Research Group has initiated coverage of cable
programmers Viacom and Discovery, saying the former stock is undervalued while
the latter is about right. The financial adviser also upgraded its target price
for CBS stock, suggesting the government will continue to value over-the-air

Pivotal senior research analyst Brian Wieser gives Viacom a
big "buy" rating, giving its stock a per-share target price in 2013
of $73, a whopping 46% above last week's close.

He says the market's focus on short-term metrics has
"beaten" down the stock price, and that Pivotal's research suggests
that the fears of young viewers being siphoned from the Nickelodeon TV channel
to online content have been overstated. "Our analysis of relevant data
confirms for us that kids' viewing is not meaningfully impacted by consumption
of TV content on alternative viewing devices," he says.

As for Discovery, Pivotal initiates coverage with a
"hold" rating, targeting its stock at $58 in 2013, 6% above its
last-week close.

In a related announcement, Pivotal said it was raising its
2013 target price for CBS shares from $39 to $43, citing strong underlying
assets, margin improvement and cast-flow generation. In addition, cites public
policies "supporting the company's broadcast businesses."

While broadcasters often feel that federal regulators are
treating them as redheaded stepchildren, Pivotal sees a bright future.

"If retransmission consent rules were to be found
unconstitutional or if new technologies emerged to threaten broadcasters'
abilities to generate revenues from these rules, we believe that new rules
would eventually emerge to better enable local broadcast licensees to generate
revenues in other ways," said the Pivotal report. "[Because]
broadcasters are critical providers of local news and information in their communities,
we believe that policy-makers would not allow local broadcasters to suffer the
same fate newspapers are facing, especially if they continue to provide public
goods that are enjoyed on a sufficiently wide basis."