Analyst Upgrades Rating, Price Target on AMC Networks Stock

Susquehanna's Vasily Karasyov cites a possible settlement of litigation with Dish later this year and the second anniversary of the spin-off from Cablevision as catalysts.

A Wall Street analyst on Wednesday upgraded his rating and target price on the stock of AMC Networks, led by CEO Josh Sapan, predicting it could rise 23 percent to $49 over the next year.

Susquehanna Financial Group's Vasily Karasyov upgraded his rating from "neutral" to "positive" and boosted his target by $7 from $42 in a report entitled "The Elephant Will Leave the Room." He cited a possible settlement of litigation with satellite TV giant Dish Network, which recently stopped carrying AMC's AMC, IFC and other cable channels, and the company's anniversary as a stand-alone company.

"We see the likely global settlement of the Dish litigation and the approach of the second anniversary of the spin-off [from Cablevision Systems] as positive catalysts," he said. "Our upgrade and price target do not incorporate any potential cash proceeds to AMC from Dish." In his note, he highlighted that the two-year spin-off anniversary could lead to renewed speculation that some company could make a takeover play for AMC Networks.

What if AMC shares decline over the near term? "We would see stock moves to the downside prior to the Dish litigation resolution as buying opportunities," Karasyov said, pointing out that one of his colleagues predicts a verdict could be reached in mid-October.

That would mean that the financial impact of the loss of carriage on Dish "is temporary in nature," the analyst said. "We estimate it at $17 million in affiliate revenue and an average of $11 million in advertising revenue per quarter, which translates into an estimated $26 million" in operating cash flow.

Added Karasyov: "Following the likely settlement, sentiment around AMC shares should get another boost as the second anniversary of the spin off from Cablevision approaches, the point after which spun-off companies can normally be sold."


Twitter: @georgszalai