AMC Networks is struggling to keep stock prices up during a wave of cord cutting. Morgan Stanley downgraded AMC’s stock from “Equal-Weight” to “Underweight”, according to recent reports as stock prices drop from $19 per share to a mere $12 per share.
Sources report AMC Networks’ stock was downgraded due to “exposure to legacy headwinds” by analysts at Morgan Stanley.
“We downgrade AMCX from an Equal-weight to Underweight rating based on its exposure to the rising macro challenges and see greater risk of downward estimate revisions below consensus expectations. We lower our adj. EBITDA over the next three years to reflect a down 10 percent CAGR through ‘25E (vs. -5 percent previously), driven by cord-cutting pressures and slowing streaming growth,” said Morgan Stanely analysts.
Morgan Stanley went on to venture:
“As the industry cord-cutting trends continue to worsen, we see greater downside risks on the revenue outlook across both linear affiliate fees and linear advertising. This is true for the broader industry, but on a relative basis, AMC’s lower scale puts greater pressure on these revenue sources as the ability to drive pricing power is more limited in our view.”
Since then, The Motley Fool reports shares have gone up by 2 percent this afternoon as more investors bought more shares as the stock began selling earlier this morning. The Motley Fool still recommends selling AMC stock as the network offers no dividends. Investment portfolios including AMC Network shares aren’t expected to see any earnings growth over the next five years based on their current standing.
“All things considered, there seem to be precious few good reasons to own this stock right now,” says The Motley Fool. “Investors were right about this one the first time – when they were selling AMC stock this morning.”
Cord cutting has inspired a number of networks to refocus efforts towards direct-to-consumer streaming services as cable providers and theaters see a decline in numbers.