AMC Networks' Leadership, Advertising Growth Make It A Buy: Evercore ISI

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  • AMC Networks, Inc. AMCX has seen a 14.37 percent increase in its share price, year to date.
  • David Joyce of Evercore ISI has upgraded the rating on the company to Buy, while maintaining the price target at $90.
  • Joyce believes that AMC Networks is “one of the best advertising growth stories,” that the stock has the potential for 22 percent upside and its risk/reward profile is attractive at present.

Analyst David Joyce expressed confidence in the company’s advertising growth over the next few quarters, driven mostly by positive comps in 3Q15, which in turn are expected to be driven by the new show, Fear the Walking Dead, as well as from Humans, an original series that aired earlier in 3Q.

Although Human was able to garner an “acceptable” average rating of 0.39 among its adults viewers, the metrics for Fear the Walking Dead was lower than expected, due to which the 3Q15 revenue and EPS estimates have been lowered.

However, Joyce believes that “margins tend to be somewhat of a wild card and there could be upside on that front – we are still within guidance of margins being “broadly stable” for the year.”

Joyce also expressed optimism regarding AMC Networks’ “original programming, with ownership rights,” which he believes “could lead to healthy long-term economics.” The airing of Into the Badlands in November 2015 and Preacher in 2016 could also add to the positives for the company.

According to the Evercore ISI report, a share buyback program could also be on the cards, given the company’s 2Q15 gross leverage ratio. However, “AMC Networks’ balance sheet capacity should also be taken into consideration when investors contemplate potential consolidation alternatives of mid-tier content companies,” the report added.

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Posted In: Analyst ColorUpgradesAnalyst RatingsDavid JoyceEvercore ISI
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