AMC Networks stock dips after downgrade at Morgan Stanley to Under Weight
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AMC Networks' (NASDAQ:AMCX) stock was downgraded by Morgan Stanley to Under Weight (UW) from Equal Weight (EW) based on exposure to legacy headwinds.
Morgan Stanley analysts said that while Netflix (NFLX) is clearly the streaming winner, the market's evaluation of the value of that prize could change. Streaming as an industry has seen a significant moderation in growth and is maturing.
If Netflix results come in lower than expected, there is likely risk to its multiple. Market expectations for accelerating net additions without any material re-acceleration in content spending is probably the biggest risk to shares, according to analysts.
The firm added that for Media companies which attempted to chase Netflix, that chase is largely over. Now the debate is about â 1) the ability to generate any reasonable FCF from streaming and 2) the pace of cord-cutting and audience erosion in linear networks. The firm noted that as the Pay-TV universe reduces in absolute size, the pace of cord-cutting likely moderates.
The firm noted that visibility into the timing of this moderation is low and there remains risk that the migration of sports outside of the bundle could accelerate and thus accelerate cord-cutting in the medium term.
The analysts downgraded AMCX from EW to UW rating based on its exposure to these legacy headwinds, and it also lowered its price target for EW Warner Bros. Discovery (WBD) and EW Fox (FOXA) to account for its updated and more negative view of cord-cutting. The firm had recently also lowered its price target OW The Walt Disney Company (DIS) shares.
AMCX -4.28% to $10.95 premarket June 6
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