Impressed with how Time Warner has “completed the Time Warner Cable separation, terminated the AOL management team that we felt needed to be fired, exceeded our Q1 earnings expectations and announced their intention to fully separate the AOL division by year-end 2009,” Pali Research analysts Rich Greenfield and Ari Danes have raised their estimates and price targest for the company. (Registration required.)
They say Time Warner (TWX) will generate EBITDA of $6.5 billion in 2009, up from an earlier estimate of $6.4 billion. The pair also raised their target price for the company’s shares to $28, up from $21.
They give four reasons for the optimism:
- Holding $7 billion in cash, they figure Time Warner will resume its share buyback program.
- Time Warner’s cable networks will represent 70% of the company’s EBITDA, and after watching them grow 9% in Q1, Pali figures subcriber fees should grow 8% by the end of 2009.
- Rich and Ari believe it’s possible Jeff Bewkes will spin off Time Warner’s magazine business next, paring the company down to cable networks and filmed entertainment.
- Time Warner probably won’t make any acquisitions in the next 12-18 months.
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