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Investing.com - Morgan Stanley (NYSE:MS) reduced its price target on Starz Entertainment (NASDAQ:STRZ) to $14.00 from $15.00 on Monday, while maintaining an Equalweight rating on the stock. According to InvestingPro data, the stock has declined 10% in the past week, with current trading at $12.24, significantly below its 52-week high of $22.98.
The firm cited Starz’s smaller size and lower investment levels as limiting factors for subscriber growth and pricing power compared to larger competitors in the streaming industry. Morgan Stanley’s revised price target is based on approximately 4.5x forward EBITDA with limited multiple expansion expected due to Starz’s sub-scale market position and elevated net debt leverage. InvestingPro analysis shows the company’s current EV/EBITDA multiple at 5.73x, with EBITDA standing at $160 million for the last twelve months.
The investment bank lowered its calendar year 2026/2027 adjusted OIBDA forecast by approximately 3-4% from previous estimates, noting that greater revenue pressures are partially offset by lower expense growth projections. Morgan Stanley highlighted that net debt currently represents about 70% of Starz’s enterprise value. InvestingPro data reveals concerning liquidity metrics, with a current ratio of 0.18 and total debt to capital ratio of 0.79, supporting Morgan Stanley’s leverage concerns.
Starz shares currently trade at approximately 30% levered 2026 estimated free cash flow yield, with the company’s planned reduction in content spending for 2026/2027 expected to significantly improve free cash flow burn next year.
Morgan Stanley cautioned that there are downside risks that a newer content slate or underinvestment could lead to increased subscriber churn, while noting the company’s long-term free cash flow sustainability depends on Starz’s ability to grow revenue and EBITDA beyond its current cost-cutting measures.
In other recent news, Starz Entertainment announced a decline in revenue and subscribers during its Q2 2025 earnings call. The company’s total revenue decreased to $319.7 million, representing a 2% drop from the previous quarter and a 7.4% decrease compared to the same period last year. Despite these setbacks, Starz Entertainment has expressed optimism about achieving revenue and subscriber growth in future quarters. The company did not report any major mergers or acquisitions at this time. Analysts have yet to provide any updates on stock ratings or forecasts for Starz Entertainment following the earnings report. The company remains focused on strategic initiatives to reverse the current downward trend in revenue and subscriber numbers. These recent developments come as Starz Entertainment navigates a challenging market environment.
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