AMC Networks (AMCX) Could See 50% Top Line Acceleration - Piper Jaffray

Piper Jaffray analyst, Stan Meyers, is now estimating that the AMC Networks (NASDAQ: AMCX) could see growth increase by 50% in 2016 despite expecting a more aggressive pace of subscriber declines. This is driven by additional shows, expansion of successful series and margin expansion.

The analyst estimates the 2016 line-up combined with the episode expansion of the existing shows will generate an incremental $196M in revenues in 2016E, accelerating the rate of growth to 12% vs +8% previously.

2015 proved to be a pivot year for AMC with the top three highest rated freshmen shows in cable history. The analyst believes that 2016 will see more of the same. The network will deliver three new major original shows (Night Manager, Preacher and Broke) and double the number of episodes for Fear the Walking Dead and Badlands.

Expectations are that Walking Dead and Fear the Walking Dead will bring viewers to sample its new shows and concerns driven by fear of cord-cutting are overblown.

AMC is best positioned amid the 'slimming' of the cable bundle, but the analyst is increasing the pace of subscriber decline to -2.5% over the next three years versus our previous CAGR estimate of -1%. However, given the recent carriage renegotiations and success of AMC's programming, we expect the affiliate fees per subscriber to grow at a 10% CAGR over the next three years vs 8% previously

Despite the expanded line up in 2016, we expect margins to improve 40bps+ to 33.3% as AMC will be licensing its three new shows, driving costs lower. The Night Manager will be co-produced with BBC, the Preacher will be largely produced by Sony and Broke will produced by Lionsgate. We also, expect growing high-margin SVOD revenue from Hulu to help drive margins higher.

Flowing through the model, these assumptions lead to $959M in EBITDA in 2016, 11% ahead of consensus.

No change to Overweight rating or $90 PT.

For an analyst ratings summary and ratings history on AMC Networks click here. For more ratings news on AMC Networks click here.

Shares of AMC Networks closed at $74.69 yesterday.

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