AMC Networks Inc. (AMCX) shares have been riding high lately, caught up in the excitement around Netflix Inc. (NFLX) and Paramount Skydance Corp (PSKY) battling to acquire Warner Bros Discovery Inc. (WBD). But Seaport Research Partners analyst David Joyce isn't buying the hype, downgrading the stock from Buy to Neutral.
Here's the problem: while everyone's distracted by the M&A drama, the fundamental business keeps getting worse. Joyce projects AMC Networks will see consolidated revenue drop 5.4% in 2025 to $2.29 billion. That's actually steeper than the company's own 5% decline guidance, which tells you something about how confident the analyst is in management's optimism.
The Linear Networks Problem
The entire linear networks industry is facing what Joyce describes as declining subscriber, revenue, and EBITDA trends. Cable TV, as we all know by now, is not exactly where the growth is. Traditional television networks are watching their audiences migrate to streaming platforms, and that's showing up in the financial results.
The Bright Spot Nobody's Talking About
There is some good news buried in here. Streaming subscription revenue is growing 12.8% year-over-year and now represents 30% of total revenue. "Streaming Subscription revenue is the substantial growth driver, +12.8% y/y and now representing 30% of total revenue, which bodes well for continued FCF generation and equity value," Joyce wrote in his downgrade note.
That streaming growth actually makes AMC Networks an attractive acquisition target if the industry consolidation wave continues. The company is generating free cash flow, which is always nice, and the streaming business provides at least some path forward in a world where cable is dying.
Why Downgrade Now?
Joyce's logic is straightforward: the stock is fairly valued at current levels unless some consolidation event materializes. And with the Warner Bros Discovery acquisition battle still unfolding, it's better to sit on the sidelines until that dust settles. Why rush in when you can wait to see how the larger industry shakeout plays out?
Price Action: Shares of AMC Networks declined 2.30% to $9.78 at the time of publication on Monday.
