CBS is an attractive acquisition target, so investors should buy the dip, analyst says

Key Points
  • CBS stock is down on news of ex-CEO Les Moonves' departure, but it's an attractive target for a strategic acquisition, B. Riley FBR analyst Barton Crockett says.
  • As far as which companies might be most likely to acquire CBS, Crockett says not to write off atypical players, such as Amazon and AT&T.
  • Mario Gabelli of Gabelli Funds says to buy CBS stock now.
This analyst says now is the time to buy CBS

Investors should buy CBS on the dip, because it is a very attractive acquisition target for companies outside of the television industry, B. Riley FBR managing director and analyst Barton Crockett told CNBC on Monday.

"CBS is a huge brand; it's the most watched network on TV. They also have Showtime, which is big and kind of direct-to-consumer. I think that CBS could be an interesting bolt onto a larger platform," Crockett said on CNBC's "Power Lunch."

On Sunday evening, CBS announced "effective immediately," following numerous allegations of sexual misconduct that spanned much of his career. The company said COO Joseph Ianniello will now act as CEO "while the Board conducts a search for a permanent successor."

Also on Sunday came news of a board reshuffling and an end to hostility between CBS and National Amusements (NAI), which owns a controlling stake in CBS. The two companies will drop their lawsuit against each other, and NAI will not pursue the merger of CBS and Viacom for at least two years. NAI also said it would consider "any business combination transaction or other strategic alternative that the independent directors believe are in the best interests of the Company."

"I think what was interesting about what came out of the developments on Sunday is the statement from National Amusements that they would be open to looking at other possibilities, which I think, ultimately, can make a lot of sense for CBS," Crockett said on Monday.

Crockett said CBS excels in content but needs a bit of help with distribution.

"I think that distribution is where they could be helped if perhaps they were part of some other ecosystem, which is I think what was behind AT&T's acquisition of Time Warner, I think was behind Disney's positioning with Fox," Crockett said. "Ultimately, we are going to see that what works best from a consumer perspective is this combination."

As far as which companies might be most likely to acquire CBS, Crockett said not to write off atypical players, such as Amazon and AT&T, which operate outside traditional media.

"I think where the consumer is going and where the industry is going, content is going to increasingly be a feature on larger platforms, whether that's wireless, cable, communications or internet platforms," he said.

Mario Gabelli of Gabelli Funds, the second largest shareholder of Viacom voting shares, agreed that a merger is in CBS' future but said it will likely be with Viacom. And new CBS board member Richard Parsons, former CEO of Time Warner, may help with that, Gabelli said.

It becomes a "notion of common sense. At some point in time, [Parsons is] going to say, 'Hey, look. Let's put the two together,'" Gabelli said on CNBC's "Halftime Report."

Gabelli agreed the combination wouldn't solve CBS' distribution problem or win it enough direct-to-consumer subscribers to combat the likes of Netflix, but he called that "a work in progress."

He also said certain factors — CBS' current stock value, Ianniello as interim CEO, a new board and strong content —position the company well for the future.

"I'm recommending that you pick up the phone and call your broker and buy CBS today," Gabelli said.

CBS closed down 1.5 percent at $55.20, down about 6.4 percent year to date.

'Pick up the phone' and buy CBS, Gabelli Funds CEO says