AMC Networks: Sell-Off from Cord-Cutters
09/21/2017 6:00 am EST
AMC Networks (AMCX) is a recommended stock in our model portfolio that has exhibited persistent weakness, down 7.1% month-to-date, explains Taesik Yoon, growth stock expert and editor of Forbes Investor.
This appears to have been triggered by disappointing news by two of the biggest domestic media entertainment companies during the recent Bank of America Merrill Lynch Media, Communications and Entertainment Conference, which has pressured shares of nearly all traditional television content providers.
Specifically, major cable operator Comcast (CMCSA) revealed that its number of video subscribers would be down 100,000-150,000 for the quarter.
Similarly, Disney (DIS) said that earnings for the current fiscal year (which ends this month) will be largely unchanged from the $5.72 realized in 2016, implying that results for the final quarter will be weaker-than-expected.
Yet given the rising trend of “cutting the cord” by consumers, these announcements shouldn’t have come as much of a surprise. Indeed, this was one of the reasons why shares of AMCX had sold off so significantly over the past two years.
More importantly, the company has done a good job of offsetting this attrition by developing original programming content that have helped successfully expand viewership for several of its networks, expand internationally and generate substantial income from the licensing of these original programs.
It has done this through a variety of distribution channels, including TV markets worldwide, Internet-based subscription video on demand (SVOD) services or digital platform providers such as Netflix, Hulu, and Amazon Prime, and physical (DVD and Blu-ray) formats.
Thus, we think investors are continuing to underestimate AMCX’s ability to successfully navigate the secular changes currently taking place in its marketplace.