What’s Driving Down AMC’s Stock Price?

May 8, 2014  •  Post A Comment

The stock price of AMC Networks hit a 52-week low today, and a key reason that's being cited is a familiar one in the television business: the high price of original series.

The price move reflects Wall Street's disappointment after first-quarter earnings rose less than expected with higher costs, according to The Hollywood Reporter.

"The company's quarterly profit of $72 million was up 16 percent, but analysts had on average expected a bigger gain," THR reports. "In early Thursday trading, the stock was down 13.5 percent at $56.77 after earlier going as low as $53.99. Last June, the stock had hit $61.01, which was its 52-week low until Thursday morning, according to Bloomberg data."

The report notes that the share price hit a 52-week high of $78.39 back in March.

THR adds: "During an earnings call on Thursday, CEO Josh Sapan faced several questions about the cost for producing and promoting original series, which partially outweighs the revenue boost they provide by lifting advertising revenue. In the first quarter, for example, AMC hit show 'The Walking Dead' contributed to a 27 percent ad gain for the company's U.S. business."

Sapan said his executive team is "appropriately unforgiving" toward shows that underperform, and pointed to a number of successes across the firm's cable channels.

"Overall, company executives touted such AMC hit shows as 'Walking Dead' and 'Mad Men,' which he lauded for its 'extraordinary' staying power, as well as 'Rectify' on SundanceTV, the story reports. "And Sapan said new Revolutionary War spy show 'Turn' on AMC has done OK early on amid some concern about weaker-than-hoped [viewership]. COO Ed Carroll said about the series that company executives 'like what we're seeing so far' and that it will eventually come to Netflix down the line."

Some Wall Street observers, however, responded strongly to concerns that costs are trending higher.

"ISI Media analyst David Joyce downgraded his rating on the stock of AMC Networks after the earnings report, saying: 'Despite the stronger-than-expected advertising growth, the lack of visibility on expense growth continues to concern investors,'" the report notes.

The Walking Dead.jpg

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