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On Wednesday, UBS analyst John Hodulik revised the price target for AMC Networks (NASDAQ:AMCX) stock to $8 from the previous $9, while reiterating a Sell rating on the company. Hodulik’s assessment followed AMC Networks’ release of its fourth-quarter results, which showed mixed performance and a guidance for 2025 that fell short of market expectations. According to InvestingPro data, the stock has declined nearly 15% in the past week, now trading significantly below its 52-week high of $18.58.
AMC Networks reported a year-over-year revenue decrease of 12% in the fourth quarter, contributing to a 6% decline for the full year when excluding mergers and acquisitions and one-time items. The revenue drop was slightly more than UBS’s estimate of an 11% decline. Adjusted operating income, however, rose by 29% year-over-year, which was slightly below UBS’s projection of a 33% increase. The annual adjusted operating income finished at a 16% decrease. InvestingPro analysis suggests the company is currently undervalued, with strong liquidity indicated by a current ratio of 2.38 and EBITDA of $528.48 million for the last twelve months.
The company’s guidance for 2025 anticipates a continued 5% revenue decline to approximately $2.3 billion, which is in line with UBS’s previous estimate but below the consensus of $2.39 billion. This expected decline is attributed to challenges in the linear television sector and decreased licensing revenue, despite projected growth in streaming services. While current performance appears challenging, InvestingPro reveals several positive indicators, including expected net income growth and attractive valuation metrics with a Price/Book ratio of just 0.43. For comprehensive analysis of AMC Networks and 1,400+ other stocks, investors can access detailed Pro Research Reports through InvestingPro. Operational expenses are also predicted to rise due to outsourcing initiatives and increased direct-to-consumer marketing costs. As a result, adjusted operating income for 2025 is projected to be between $400 million and $420 million, marking a 27% drop at the midpoint from previous estimates.
Free cash flow (FCF) for the fourth quarter was reported to be better than expected at $38 million, in contrast to UBS’s forecast of a $11 million deficit. The year ended with $330 million in FCF. Management has raised its combined free cash flow outlook for 2024-2025 by about 10% to $550 million, implying an estimated $220 million in 2025, given the anticipated higher interest expenses and the absence of previous year’s production tax incentives.
In terms of capital allocation, AMC Networks is focusing on reducing its gross debt, with UBS estimating a net leverage of 3.4 times by the end of 2025, compared to 2.8 times at the end of the previous year. Despite the company’s efforts to prioritize cash generation, Hodulik expressed continued concern over the long-term challenges facing the linear TV industry, which underpinned the decision to maintain the Sell rating for AMC Networks shares. Analyst targets currently range from $6 to $15, reflecting diverse views on the company’s prospects. For deeper insights into AMC Networks’ financial health and growth potential, investors can explore additional metrics and analysis through InvestingPro.
In other recent news, AMC Networks reported its fourth-quarter 2024 earnings, revealing a miss in both earnings per share (EPS) and revenue compared to analysts’ forecasts. The company posted an EPS of $0.64, falling short of the anticipated $1.03, while revenue came in at $599 million, below the expected $609.37 million. For the full year 2024, AMC Networks reported a consolidated revenue of $2.4 billion, reflecting a 6% decrease year-over-year. Despite the revenue decline, the company saw an 8% increase in streaming subscribers, reaching 12.4 million, highlighting growth in digital platforms.
AMC Networks has provided forward-looking guidance for fiscal year 2025, projecting revenues of $2.3 billion and adjusted operating income (AOI) between $400 million and $420 million, numbers that fall short of previous projections. Analyst firm TD Cowen responded to these developments by reducing AMC Networks’ stock price target from $11.00 to $6.00 but maintained a Hold rating. The firm also adjusted its fiscal year 2025 revenue estimate downward from $2.47 billion to $2.31 billion, indicating a year-over-year decrease of 5%.
AMC Networks has launched several new initiatives, including a content exchange with MGM Plus, and expanded its partnerships with platforms like Netflix (NASDAQ:NFLX) and Roku (NASDAQ:ROKU). The company emphasized its strategic focus on balancing investments in programming with driving profitability, as stated by CEO Kristin Dolan. Additionally, the company’s adjusted earnings per share estimate for AMC Networks has been lowered to $2.04 from the prior estimate of $2.38, reflecting ongoing valuation challenges.
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