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Is It Time to Consider Time Warner?

I have to agree with Bewkes as there have been very few media companies that have matched Time Warner in terms of capital re-investments.

One area where the company has made a considerable amount of investment is in its "TV Everywhere" initiative as it tries to capitalize on the growth of mobile devices. To that end, Time Warner has recently formed partnerships with Comcast and Viacom (VIAB) to allow subscribers access to some of its most popular channels at no extra cost.

These rivals see the writing on the wall as streaming giants such at Netflix (NFLX), Hulu and even Amazon's (AMZN) Prime pose potential threats by offering live TV viewing options to their subscribers. What's more, customers have shown they want this flexibility and prefer to not be confined to their living rooms.

Time Warner understands the future of TV and anticipates that at some point the subscription model will venture on to the cloud. The company is poised to serve as a pioneer in what appears to be a transformation of traditional media.

Bottom Line

For such a mature company, Time Warner never takes its eyes off of the future. This is one of its most impressive qualities. However, that revenue fell slightly this quarter was a disappointment, breaking a string of four consecutive quarters of revenue growth, which dated back to Q3 of 2011. Nonetheless, with a price-to-earnings ratio of 16, lower than both Comcast and Disney, the stock still looks attractive.

What's more, aside from paying a respectable yield, Time Warner is fundamentally sound -- ending the quarter with $3.19 billion in cash and operating cash flow of $3.5 billion.

With shares trading at $44, there is considerable amount of value as the stock should see $50 to $55 during the course of the next six to 12 months. But investors have to be patient for the stock to work -- particularly as it executes its mobile strategy.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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