Here’s Why AMC Networks gained 30% On Friday

Written by: Jayson Derrick
February 26, 2021
  • AMC Networks reported a full-year 8% revenue decline in 2020.
  • However, shares have approximately doubled in the past year.
  • CEO Josh Sapan attributes the gains to investors understanding its streaming strategy.

Shares of AMC Networks Inc. (NASDAQ: AMCX) gained around 30% on Friday after the entertainment company reported fourth quarter and full-year results.

Better than expected Q4 report

AMC Networks, not to be confused with the movie theater chain AMC Entertainment Holdings Inc (NYSE: AMC), said it earned $2.72 per share in the fourth quarter on revenue of $780 million. This represents a beat versus expectations of $1.69 per share and revenue of $705.01 million.

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Operating income rose 95.1% year-over-year to $81 million, marking an end to a “year of strong performance,” AMC Networks President and CEO Josh Sapan said in the earnings release. The company successfully navigated through a “uniquely challenging” year and an “uncertain environment.”

Full-year 2020 revenues were down 8% year-over-year at $2.815 billion and profit was naturally lower as well on a year-over-year basis amid production delays and other factors caused by the COVID-19 pandemic. Other companies across Hollywood and other forms of entertainment experienced similar woes in 2020 but some are optimistic for the future.

The company still had positive full-year metrics to report, including ending 2020 with more than 6 million streaming viewers, marking an increase of more than 150% year-over-year. AMC Networks also renewed eight major carriage arrangements, reached agreements with and launched content on new streaming platforms, and resumed production of several hit shows, including “The Walking Dead.”

CEO: What the market is seeing

AMC Networks’ stock has nearly doubled over the past year despite 2020 highlighted by declining revenue but the market is seeing and appreciating its prospects moving forward, Sapan said on CNBC’s “Squawk on the Street.

AMC Networks is on a mission to become the “worldwide leader in targeted streaming,” the CEO said. The company has multiple different streaming platforms that are designed to target an audience looking for something specific. For example, Shudder focuses on the horror entertainment category and Acorn TV focuses on United Kingdom content.

“We have a place in the market that is unique, it’s sustainable, it’s strong, and for fans of these services, it is their go-to place,” the CEO said.

Sustainability of growth

The case against AMC Networks’ streaming ambitions is based on the company’s small size compared to much larger and powerful rivals, especially Netflix Inc (NASDAQ: NFLX). But Sapan doesn’t see it that way at all.

Streaming revenue improved from a revenue run-rate of $125 million in early 2021 to now more than $300 million while momentum continues to improve. Perhaps more important, the company is embedding its trimming business with its cable distributors, such as AT&T’s DIRECTV

“Our ecosystem is really working quite well,” he said. “Meaning the base part of our business, that’s linear channels, is now sort of in great harmony with our streaming services that are growing at a very, very, very, very strong rate.”