AOL Time Warner's ( AOL) old-line media and entertainment assets are starting to live up to their billing and, in the near term, should shore up the parent's profitability, an analyst argued Wednesday.

Smith Barney upgraded the shares to in-line from underperform and raised its price target to $17 from $11, saying the media side deserves to trade at about 13 times earnings before interest, taxes, depreciation and amortization, compared with the Internet side's 9.5 EBITDA multiple.

"While AOL Time Warner still faces challenges in the uncertain turnaround in AOL and ongoing federal investigations, we believe the stock's performance may get more in sync with its media/Internet peers," the brokerage wrote.

The shares closed Tuesday at $15.32, down 22 cents, or 1.4%. They closed at $11.11 on March 11, the day the stock market began to rebound.

Smith Barney's confidence comes despite some lingering issues at AOL, which currently is under investigation for the way it booked acquisition and advertising proceeds in a deal with Bertelsmann, among other things.

"The accelerating pace of consumer migration from dial-up to broadband still threatens to erode AOL's 25 million-member U.S. subscriber base longer-term, but we believe a combination of cost-cuts, falling network telecommunications costs and stabilizing ad dollars will put a floor under the AOL unit cash flow in the near term," it said.