Benchmark Capital upgraded Time Warner Inc.  (NYSE: TWX) to buy from hold, saying that accelerating advertising recovery is likely to help sustain high-single digit growth in Networks revenues.

Time Warner stock has proven its financial resilience through the economic downturn, and should benefit from an accelerating advertising recovery as the economy grows, analyst Frederick Moran wrote in a note to clients.

Advertising demand remained strong in the post election period and has accelerated into the first quarter of 2011, with solid increase in subscription rates.

Although the entertainment film schedule looks light in 1Q11, Warner Bros. has been the most consistent box office leader for years and should be able to deliver reliable cash flow, Moran said.

Moran said the company's outlook for earnings per share growth in low-teens for 2011 or $2.72 - $2.75 per share shows sustainable growth and profit trends. Benchmark expects the company to earn $2.75 a share and Wall Street projects earnings of $2.74 a share, according to analysts polled by Thomson Reuters.

Meanwhile, Time Warner is enhancing its online offering to compete with other streaming formats through HBO Go and TV Anywhere.

Despite potential piracy issues, we don't believe either offering will impair Time Warner's overall growth. We forecast that HBO will continue to show high-single digit revenue and double-digit cash flow growth as last year's subscriber losses were mostly promotional, non-paying subscribers, Moran said.

The brokerage also said the company's management has proven itself focused on driving shareholder value via operational discipline, raising its 3 percent yielding dividend and accelerating its share repurchases.

Time Warner returned $3 billion, over 100 percent of its free cash flow, to shareholders in 2010 in the form of dividends and buybacks. The company bought back $2.1 billion of stock, including 15 million shares repurchased for $484 million in the fourth quarter of 2010.

In addition, the company's management authorized a $5 billion share repurchase program and has pledged to buy the stock even more aggressively. The quarterly dividend was raised $0.235.

Meanwhile, the $3.7 billion of cash on Time Warner's balance sheet gives it great financial flexibility. Harnessing this financial flexibility could support Time Warner's stock. Time Warner will likely undertake small to medium-sized acquisitions, expand and accelerate share buybacks and steadily increase the dividend.

Moran, who raised the price target on the Time Warner stock to $44 from $39, said the combination of Time Warner's steady, predictable top-line growth, cost control, cash hoard, low debt and reliable dividend should help support the stock.

Shares of Time Warner closed Friday's regular trading session at $38.18 on the NYSE.