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Can AMC Networks Keep Pumping Out Great Television? It Might Be The Only Thing That Matters

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Can AMC Networks Keep Pumping Out Great Television? It Might Be The Only Thing That Matters

AMC Networks Inc (NASDAQ: AMCX) saw its stock hit a fresh 52-week low of $52.41 on Thursday after the company's second-quarter print came in mixed.

AMC earned $1.28 per share on revenue of $685 million, which matched analysts' expectations on the earnings side, while revenue exceeded Wall Street's expectations of $676.9 million.

Doug Mitchelson of UBS maintains a Sell rating and $57 price target on AMC's stock following its earnings print, even though the company's reported earnings per share came "nicely ahead" of his $1.10 per share estimate.

Related Link: AMC Networks Beats Revenue Estimates

Mitchelson did, however, note that AMC's third-quarter advertising revenue is "a bit light," as the analyst was expecting a 4 percent growth, but management guided for revenue to be flat. The analyst suggested this may be due to competition from the Olympics and his assumption that "Fear the Walking Dead" will see "poor ratings."

A Look Ahead

Looking forward to the remainder of the year, Mitchelson expects an 8 percent U.S. ad growth, which effectively puts to an end the company's decade-plus run of producing double-digit ad growth.

The analyst added that the key to the company's success moving forward is "simply content success" and whether or not the main channels will be included in all of the new internet TV services. For example, Hulu's internet TV platform will launch in early 2017 and the inclusion of AMC and all of its properties "will be important" aspect.

Potential catalysts include season 2 of "Fear the Walking Dead" on August 21 and "The Walking Dead" season 7 on October 23. However, if these shows see accelerating declines, then the analyst's long-term forecast of 1 percent four-year advertising compounded annual growth could prove to be optimistic as these two shows account for 25 to 30 percent of total ad revenue.

Latest Ratings for AMCX

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Oct 2020JP MorganDowngradesNeutralUnderweight
Jul 2020Goldman SachsInitiates Coverage OnSell

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