Hargreaves: AMC Isn't A 'Walking Dead' Stock, So Buy It
In a report published Friday, Pacific Crest analyst Andy Hargreaves maintained an Overweight rating on AMC Networks Inc (NASDAQ: AMCX), while reducing the price target from $88 to $83, despite the company reporting its 2Q results ahead of expectations.
The company generated better-than-expected distribution revenue, which drove its quarterly revenue to $601 million, beating the Pacific Crest estimate of $593 million and consensus expectation of $590 million. Domestic advertising revenue grew 14 percent y/y, implying low-single-digit organic ad growth.
AMC's margins in both the US and international networks were higher than expected, driving adjusted EPS to $1.23, as compared to the Pacific Crest estimate of $0.94 and consensus expectation of $0.92.
The EPS estimate for 2015 has been reduced from $5.02 to $5.04 to reflect an increase in domestic costs. The EPS estimate for 2016 has been reduced from $5.27 to $5.17 to reflect lower non-controlling interest.
Analyst Andy Hargreaves said that the commentary from management "suggested that ad pricing continues to be strong for its original programming both at the recent upfront and in the scatter market. If new 2H shows Humans, Fear The Walking Dead, and Into The Badlands attract audiences and CPM's that are at least in line with other recent originals (excluding The Walking Dead), we believe our model would prove conservative."
"We continue to believe AMC's focus on high-quality scripted originals positions it to perform well in a weak ad environment, but also in a market that is transitioning to more on-demand entertainment. We continue to believe solid show performance can drive substantial upside to our estimates and recommend owning AMCX," Hargreaves added.
Latest Ratings for AMCX
|Oct 2016||Pacific Crest||Downgrades||Overweight||Sector Weight|
|Oct 2016||FBR Capital||Initiates Coverage on||Outperform|
|Sep 2016||Stifel Nicolaus||Downgrades||Buy||Hold|
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