National Alliance Analyst Calls Starz Sell-Off A 'Huge Overreaction'

Starz's STRZA reported failure to find a buyer generated a "huge overreaction" among investors that drove the company's share price below reasonable levels, an analyst said Friday.

Citing the sell-off, National Alliance's Robert G. Routh upgraded the pay TV company to Buy, from Hold, although he cut his target 6 percent to $35.04.

Starz shares plunged nearly 20 percent after Bloomberg reported Thursday that a raft of TV companies declined to bid on the company.

CBS, Lions Gate Entertainment, AMC Networks and Twenty-First Century Fox backed out because they thought Starz was overvalued, according to Bloomberg, which cited unnamed sources.

Starz, with a market capitalization of around $2.9 billion, had reportedly been on the block for roughly $5 billion. Its shares changed hands recently at $28.80, up more than 3 percent.

Based on an estimated 2015 earnings outlook as a stand-alone company, Routh said "the shares should be viewed here as unreasonably cheap."

In lieu of selling itself, Starz may strike partnerships with other media companies, according to Bloomberg.

Routh called a partnership with Sony or Lionsgate "a real possibility" for 2015, which "could end up being the best year for the equity and its shareholders."

Routh said Sony "is considering using Starz as a public vehicle" to highlight the value of its programming.

Such a deal would "show investors the inherent value" of Starz, Routh said.