Company Reports

We’ve removed our narrow moat ratings for both Fox and AMC Networks. Like peers who rely as heavily on traditional pay TV, streaming has disrupted these firms’ business models. We don’t think they can be nearly as profitable in a media industry built on streaming as in the landscape they historically enjoyed. We now have no-moat ratings on Fox, AMC Networks, Paramount, and Warner Bros. Discovery. Within our US coverage, Disney, and Comcast are the only firms connected to the traditional pay-TV bundle that we still think have moats, and our moat assessment for both firms relies heavily on their nonmedia assets.

AMC Networks is deploying an “all of the above” strategy, and we think that gives the firm its best chance in a difficult environment. AMC is a small player that we expect will be challenged to independently find its place with consumers who are overwhelmed with numerous different streaming services, most of which have broader and deeper content than what AMC can provide. It also must continue to find and create attractive programming, which should be increasingly difficult in an industry that now has more and much larger competitors.

AMC continues to pursue a host of outlets for its content but none seem sufficient at this point to offset the big declines in the linear television revenue that the firm historically relied upon. Neither fourth-quarter results nor weak 2024 guidance were materially different than what we expected after adjusting for the December sale of its remaining stake in an international production services business, 25/7 Media. However, with growing skepticism that the recent rate of decline will materially improve over the next few years, we’re lowering our long-term sales and profit forecasts, resulting in our fair value estimate going down to $20 from $25.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms, but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

The importance of partnerships was the key theme in AMC Network’s third-quarter earnings report as the firm struggles against steadily declining revenue. AMC’s small size leaves it in a weakening position as the traditional television business shrinks, cutting into the firm’s ability to get content in front of audiences and otherwise monetize the content. We’d still prefer the firm find a suitor, but until then, working with better-positioned rivals makes sense, in our view. We are maintaining our $25 fair value estimate.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms, but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC posted a mixed second quarter as revenue was below and adjusted EBITDA came in ahead of FactSet consensus. Cost management drove the EBITDA beat, particularly at the corporate level, but struggles in domestic pay TV persisted because of the soft advertising market and the ongoing secular decline in subscribers. We think AMC lacks the financial resources required to operate as a streaming-first business and that the Dolan family should consider a sale or merger in the near to medium future. We maintain our $27 fair value estimate.

AMC posted a slightly better-than-expected start to 2023 as revenue was in line with, and adjusted EBITDA strongly beat, FactSet consensus. The bottom-line beat was driven by cost management, particularly at the corporate level. However, the struggles in domestic linear advertising persisted, and we expect the ad market to remain soft. We still believe that AMC does not have the financial resources required to operate as a strictly streaming business, and the Dolan family should consider a sale or merger in the near to medium future. We maintain our $27 fair value estimate.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC rebounded to post a strong end to a very challenging 2022 on both the operational and personnel sides of the business. Revenue improved by 20%, a strong result after two quarters of decline. Despite the gains, domestic advertising continues to struggle, and we expect a weak first half for linear networks across the board. We maintain our $27 fair value estimate.

In a surprise announcement, AMC Networks CEO Christina Spade stepped down and the board is searching for a replacement. Chairman James Dolan also sent a memo to employees, warning that the firm could lay off up to 20% of employees in the very near future. While the press release did not specify a reason for Spade’s departure, we assume that her exit and the imminent layoffs were connected.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC posted yet another weak quarter as third-quarter revenue fell 16% because of continued weak ad and affiliate revenue. As a result, management lowered full-year guidance of flat to low-single-digit top-line growth versus low-single digits previously and free cash flow to be breakeven to $50 million versus the prior target of $100 million. We are less optimistic than management and now project a decline in the 2022 top line with another drop in 2023 due to a continued weak ad market, cord-cutting, foreign-exchange headwinds, and slower streaming growth. Thus, we are lowering our fair value estimate to $30 from $51.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC reported a weak second quarter with revenue falling short of FactSet consensus estimates. Even with soft revenue and negative free cash flow in the first half, management reiterated full-year guidance of low-single-digit top-line growth and $100 million in free cash flow. Despite the miss, the focus on niche streaming platforms continues to pay dividends, as AMC’s services added 1.3 million new customers to end the quarter with 10.8 million subscribers. We are lowering our fair value estimate to $51 from $58 to account for slower ad revenue growth in the U.S. and lower overall international growth.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC posted a mixed start to 2022. While revenue was soft during the first quarter, management reiterated full-year guidance. The focus on niche streaming platforms seems to be working, as AMC’s services added over 430,000 new customers to end the quarter with over 9.5 million subscribers. We are maintaining $58 FVE.

AMC Networks has transformed its flagship AMC channel from a minor cable channel showing classic movies into a premier prestige platform for original scripted content. The transformation provides the AMC with growth potential, but this growth remains contingent on AMC’s ability to source and cultivate strong original content as well as monetize programs internationally and on streaming platforms. The firm has successfully monetized programs like Better Call Saul with third-party streaming platforms but the launch of AMC+ may lower the price of future streaming rights if the rights are no longer exclusive.

AMC reported strong fourth-quarter results as revenue and adjusted EBITDA beat FactSet consensus expectations. The strategy of focusing on niche streaming platforms appears to be working, as AMC’s services ended 2021 with over 9 million subscribers and remain ahead of the pace needed to meet the target of 20-25 million subscribers in 2025. We are maintaining our narrow moat and $58 fair value estimate.