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

Can AMC Networks Keep Pumping Out Great Television? It Might Be The Only Thing That Matters - AMC Networks Inc. NASDAQ:AMCX

AMC Networks Inc AMCX 0.23% 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.

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.

DateFirmActionFromTo
Jul 2016UBSDowngradesNeutralSell
Jul 2016JefferiesMaintainsHold
Jun 2016Morgan StanleyDowngradesOverweightEqual-weight

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