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Key Takeaways for AMC Networks Stock:
- Despite being positioned as a platform for prestige television, AMC Networks stock (AMCX) is trading at a 50% discount to our fair value estimates.
- Investors may be selling on cord-cutting, and AMC still operates five cable TV channels, but content creation for other platforms allows them to save on costs related to maintaining libraries and retaining customers.
- AMC Networks is likely to face an annual revenue decline through 2026 with weakness in cable TV but we expect affiliate fees to increase as streaming platforms compete for content.
Andrew Willis: This stock might not be as popular as the AMC of meme stock fame, and its shows might not be in a theatre, but you’ve surely heard of the productions Mad Men, Walking Dead and Better Call Saul.
Why is it then, that the company behind these greats, with over 15 Emmy nominations, hasn’t gotten the attention of investors? AMC Networks (AMCX) is now at a massive discount to our fair value estimates, and it could be due to cord-cutting.
AMC+’s Streaming Strategy Could Help with Cord Cutting
We expect revenue to decline through 2026 as people switch from cable to streaming. But investors shouldn’t sell on the transition given the strategy at AMC+ to ‘piggyback’ on existing streaming services, like Amazon Prime and Apple TV. This helps them focus resources on writing and production, and as senior equity analyst Neil Macker puts it: Great content will always find an outlet.
For Morningstar, I’m Andrew Willis.
AMC Bulls Say
- AMC has the shows and ratings to increase affiliate fees, decreasing its reliance on the more volatile advertising revenue stream.
- AMC built a unique niche with its scripted original programming that has generated buzz through Emmy awards and resulted in high ratings.
- The hype around cord-cutting due to recent subscriber declines has been overblown. Pay-TV subscriptions have been resilient.
AMC Bears Say
- AMC's direct competitors own large studios that can produce shows for their own networks or other networks. These competitors are more likely to be approached first by show creators.
- The streaming landscape is becoming more competitive by the day and the firm's niche offerings may not be able to keep up with the larger competitors.
- Larger cable networks have noticed the success of AMC, especially its edgy original content. These larger networks like FX and TNT have deeper pockets and are capable of investing in similar programming.
