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Over the past month, we saw the meteoric rise and gut-wrenching fall of the shares of GameStop (GME - Free Report) . The move started with a short squeeze in which individual investors ferreted out a huge level of short interest and ran the price up, forcing some large hedge fund traders to cover their positions at big losses. The trade worked so well – for a little while at least – that traders went looking for other short-squeeze targets to attack next, one of which was the struggling movie theater chain AMC Entertainment Holdings (AMC - Free Report) .
Today’s Bear of the Day is not that AMC.
AMC Networks (AMCX - Free Report) operates several cable channels including IFC, BBC America and Sundance as well as two production companies and several small streaming services. The migration toward a streaming model is complicating the outlook for smaller entertainment companies and AMCX is feeling the squeeze.
When Netflix (NFLX - Free Report) successfully transitioned from a DVD-by-mail company to the world’s largest provider of streaming entertainment content, it set in motion a sea-change in the industry that continues to play out before our eyes.
If you have teenagers or young adults at home, you may have noticed that your credit card bill is swelling lately with monthly charges from streaming video services. In addition to Netflix, you might also subscribe to Disney+, Hulu and ESPN+ (both Disney products), Amazon Prime Video and Apple TV. With “must-see” original programming that’s available only on specific streaming networks, it’s not difficult to spend $50-100/month on video entertainment – and possibly more if you also include Spotify or Sirius for streaming music.
Disney (DIS - Free Report) emerged as the first large-scale challenger for Netflix and analysts wondered what the consumer tolerance would be for monthly streaming costs. Aided by hundreds of millions of people spending large amount of time at home, Disney grew its streaming services so quickly that the revenues are helping fill the shortfall from in-person experiences like theme parks and cruise ships.
Consumer appetites for more streaming entertainment and the monthly charges they bring with them turned out to be larger than many observers predicted, but they’re not infinite. Many smaller entertainment companies are feeling the squeeze, experiencing smaller audiences for traditional cable service but also not able to gain a foothold in the crowded streaming market.
AMC Networks has been on the wrong side of the trade with 2020 revenues that are expected to have declined 10% with earnings down 26%. For comparison, Netflix will grow by revenues by 19% and earnings by 59% this year.
A recent appreciation in share price has not been accompanied by increased earnings expectations and AMCX remains a Zacks Rank #5 (Strong Sell).
Streaming is not going to be a winner-take-all battle. There’s room for several companies who own and/or create desirable content to thrive, but it’s going to be a difficult situation for the smaller players without the resources to buy or create big-budget content. With a share price that has appreciated more than 150% since April of 2020, AMC Networks is a riskier investment than the more established services.
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Bear of the Day: AMC Networks (AMCX)
Over the past month, we saw the meteoric rise and gut-wrenching fall of the shares of GameStop (GME - Free Report) . The move started with a short squeeze in which individual investors ferreted out a huge level of short interest and ran the price up, forcing some large hedge fund traders to cover their positions at big losses. The trade worked so well – for a little while at least – that traders went looking for other short-squeeze targets to attack next, one of which was the struggling movie theater chain AMC Entertainment Holdings (AMC - Free Report) .
Today’s Bear of the Day is not that AMC.
AMC Networks (AMCX - Free Report) operates several cable channels including IFC, BBC America and Sundance as well as two production companies and several small streaming services. The migration toward a streaming model is complicating the outlook for smaller entertainment companies and AMCX is feeling the squeeze.
When Netflix (NFLX - Free Report) successfully transitioned from a DVD-by-mail company to the world’s largest provider of streaming entertainment content, it set in motion a sea-change in the industry that continues to play out before our eyes.
If you have teenagers or young adults at home, you may have noticed that your credit card bill is swelling lately with monthly charges from streaming video services. In addition to Netflix, you might also subscribe to Disney+, Hulu and ESPN+ (both Disney products), Amazon Prime Video and Apple TV. With “must-see” original programming that’s available only on specific streaming networks, it’s not difficult to spend $50-100/month on video entertainment – and possibly more if you also include Spotify or Sirius for streaming music.
Disney (DIS - Free Report) emerged as the first large-scale challenger for Netflix and analysts wondered what the consumer tolerance would be for monthly streaming costs. Aided by hundreds of millions of people spending large amount of time at home, Disney grew its streaming services so quickly that the revenues are helping fill the shortfall from in-person experiences like theme parks and cruise ships.
Consumer appetites for more streaming entertainment and the monthly charges they bring with them turned out to be larger than many observers predicted, but they’re not infinite. Many smaller entertainment companies are feeling the squeeze, experiencing smaller audiences for traditional cable service but also not able to gain a foothold in the crowded streaming market.
AMC Networks has been on the wrong side of the trade with 2020 revenues that are expected to have declined 10% with earnings down 26%. For comparison, Netflix will grow by revenues by 19% and earnings by 59% this year.
A recent appreciation in share price has not been accompanied by increased earnings expectations and AMCX remains a Zacks Rank #5 (Strong Sell).
Streaming is not going to be a winner-take-all battle. There’s room for several companies who own and/or create desirable content to thrive, but it’s going to be a difficult situation for the smaller players without the resources to buy or create big-budget content. With a share price that has appreciated more than 150% since April of 2020, AMC Networks is a riskier investment than the more established services.
Legal Marijuana: An Investor’s Dream Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027. Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration. Download Marijuana Moneymakers FREE >>