Is Wall Street tuning out CBS?

After many years of being the team to beat, CBS suddenly needs to play catch up.

Shares of the company's stock have fallen 23 percent since the start of the year, lagging the likes of other major media companies, such as Viacom, Walt Disney, 20th Century Fox and Time Warner. The slump follows several years of consistently strong performance since the financial crisis, when CBS' shares easily outperformed all those rivals.

Indeed, by many measures CBS still looks loved. Its eponymous TV network continues to hold onto the crown of the nation's top-rated broadcast network. Of the 29 Wall Street analysts who cover the company, 23 rate the stock a "buy," six a "hold" and none a "sell."

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Signage on the CBS Television City building in Los Angeles.
Jonathan Alcorn | Bloomberg | Getty Images
Signage on the CBS Television City building in Los Angeles.

Even hedge funds, which can be the most impatient of all investors, held onto the stock—at least partway through this year. Seven of the top 20 institutions holding CBS shares were hedge funds as of June 30, according to FactSet.

So what's the worry? The main culprit is advertising. A few years ago, about 70 percent of CBS' revenue came from advertising, mainly on its broadcast network. While the company has taken steps to reduce that amount, it still generates about half of all revenue from ad sales. CBS declined to comment.

Unfortunately, TV advertising has turned soft in the last several months. Even though CBS has managed to maintain steady ratings or even eke out slight improvements, investors are concerned advertisers will invest more dollars in digital media at the expense of TV. Those include small but fast-growing alternatives such as online video or even ads sold by the likes of Google and Facebook.

That has prompted analysts to steadily reduce revenue estimates. In the last six months, consensus estimates for 2015 revenue have fallen 7 percent to $14.5 billion. In a turbulent market, estimate revisions are likely to spook investors who are watching the advertising market closely.

There's reason to believe TV could lose more ad dollars to digital media over time. Some 38 percent of media consumption occurred on television in 2013, while TV accounted for 45 percent of advertising spending, according to Guggenheim Partners analyst Michael Morris, who cites data from advertising firm WPP.

Of course, CBS continues to carry some of the best content available, which should continue to attract advertisers. Its new shows for the fall season such as "Scorpion" and "Madam Secretary" have performed nicely and could well go on to additional seasons, said Anthony DiClemente, an analyst at Nomura. CBS also has huge amounts of exclusive sports contentincluding the new Thursday night football.

But barring an enormous ratings surprise, CBS may have a tough time turning advertising trends around completely. That may leave investors focused on other growth levers the company can still pull over time.

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One strategy that has helped CBS immensely in the last several years is charging so-called retransmission fees from cable and satellite companies. Retransmission fees are a payment CBS receives from those companies for the right to air its content.

But while CBS has forecast $2 billion in annual retransmission fees by 2020, it may be difficult to impress investors with a bigger number anytime soon. Michael Nathanson of research firm MoffettNathanson said a large portion of the company's retransmission deals are already locked up through 2020 and the growth trajectory is well understood.

Showtime, CBS' premium pay-TV network, should also drive growth over time. The network had 22.5 million subscribers at the end of the second quarter compared with 30.4 million for rival HBO, a unit of Time Warner. Showtime also charges subscribers less per month, suggesting there's upside over time if the network keeps rolling out hit originals.

CBS is keeping up with changing viewer habits. The company announced Thursday that it will offer "CBS All Access," which gives viewers the ability to watch any content from the CBS broadcast network through its website. CBS will charge $5.99 a month, income that should carry a very high margin since it already owns the digital rights to its content.

The more immediate way CBS can get the attention of investors: share buybacks. In 2015, consensus estimates reflect just 6.6 percent growth in earnings before interest, taxes, depreciation and amortization. But with the help of buybacks, analysts expect earnings per share to rise 21 percent.

The advertising market could keep CBS shares beaten down for some time, especially if advertising trends worsen. But with steady sources of growth, the share buyback could pack a dangerous punch against anyone betting against the stock.

UPDATED: This story was updated to include news of CBS' new "CBS All Access" service.