Time Warner could be undervalued in the market in my opinion, based on its estimated net free cash flows, as follows:
Trailing 12 months operating cash flow currently about $2957 million minus capital spending of about negative $119 million for the same period, or $2957 million plus $119 million, brings net free cash flow to about $3076 million, in my opinion, or about $3.73 in cash flow per share, on about 824.6 million shares outstanding.
Assuming an average growth rate in revenues of about 4.07% for the last two years, we could arrive at an estimated target stock price about $105.48E, or a potential upside of about 17.2% over its current share price of about $90, if we use the following additional assumptions:
K = 7.75%, or the S&P 500 Index estimated change for the last 12 months, from finance.yahoo.com
Beta = 1
Target Price Estimate = $3.73*1.0407/(7.75%-4.07%) = $105.48E
Looking at the size of Time Warner, trailing 12 months total revenues are at present about $27683 million. Comparing total revenues to the recent release of Magic Mike, this film has grossed about $58.6 million as of July 19th, a figure from boxofficemojo.com, or about 0.2% of trailing 12 months revenues for the company as a whole, or the film gross revenues could be comparable to about 1 penny (1 cent) of the trailing 12 months earnings per share of $4.04.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.