The Risk-Reward In AMC Networks Shares Could Be Highly In Investors' Favor
FBN Securities views the risk-reward profile of AMC Networks Inc (NASDAQ: AMCX) as highly skewed in favor of investors, given the valuation of the shares of the company. The firm's fair value calculation of the shares is $66.24, representing a 32.2 percent upside.
Robert Routh, an analyst at the firm, feels the valuation is low in light of the recent M&A moves in the TV content space. The analyst highlighted Lions Gate Entertainment Corp. (USA) (NYSE: LGF)'s pending $4.4 billion deal to merge with Starz (NASDAQ: STRZA) and the news thatAT&T Inc.(NYSE: T) is seeking to grow its portfolio of TV content through deals.
Thrust Toward Original Content
Even without a potential transaction, the firm noted that AMC Networks is materially undervalued. The firm also noted that the company is investing more in original programming rather than simply leasing programming, given the skyrocketing costs associated with the advent of OTT providers such as Netflix, Inc. (NASDAQ: NFLX) and Amazon.com, Inc. (NASDAQ: AMZN)'s Amazon Prime.
Smart Move Pays Off
This, according to the firm, has opened up opportunity for the company to distribute content on platforms apart from its domestic networks. The firm termed the move as smart, given the returns it has fetched in terms of higher ratings, affiliate fees, advertising revenue as well as public market value.
Dolan Family's Backing
The solid stable of cable networks and a decent library of owned content, according to the firm, gives scope for material upside in equity, even without a deal. While noting that the company is being run by the Dolan family, the firm said it believes that the family has proven they know how to create and highlight value for shareholders.
As such, FBN Securities has an Outperform rating on the shares of the company.
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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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