Better buy AMC on 'Better Call Saul'?

Published Fri, Jan 23 201510:49 AM EST

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

Television's favorite sleazy attorney may help AMC Networks succeed once again in the challenging world of scripted shows on cable, one analyst believes. "Recent reviews that came out this week on 'Better Call Saul' (prequel to 'Breaking Bad') are favorable, suggesting sentiment may soon improve on the stock, placing it more in favor with investors this year," JPMorgan analyst Alexia Quadrani said in a price target upgrade on Friday. "With the strong following of 'Breaking Bad,' we believe the show has a high likelihood of becoming another hit series for AMC," the note said. JPMorgan boosted its price target to $72 from $66 a share, a 7.7 percent upside from Thursday's closing price of $66.84. She added that the firm is "incrementally more positive" on AMC Networks but is keeping a "neutral" rating until the benefit from "Saul" and other returning shows becomes clearer. "Better Call Saul" tells the story of Saul Goodman (played by Bob Odenkirk) six years before he became the lawyer for Walter White (played by Bryan Cranston) in the blockbuster hit "Breaking Bad." Among the many positive reviews about the prequel, which premieres Feb. 8, Esquire 's Stephen Marche wrote on Wednesday: "I'll just say it: The first few episodes that I saw are better than 'Breaking Bad.' They are smarter. They are sharper. I have never seen a prequel handled so cleverly." The return of AMC's other popular shows, "Mad Men" on April 5 and "The Walking Dead"—strategically timed to premiere in the time slot just before "Better Call Saul"—will be additional boosts to the stock, JPMorgan's Quadrani said. She also sees a strong possibility that AMC will renew its contract with DirecTV in time for the showings. The stock has an earnings multiple of 16.5 on JPMorgan's 2015 earnings per share estimate, a slight discount to the peer group average. Read More Move over HBO...this is Netflix's other big rival "We believe sentiment is improving on the name and therefore believe the stock will be awarded a modest premium to the group (but still fall short of its historical average) toward 15.5x our 2016E EPS, which raises our 2015 year-end price target from $66 to $72," the note said.

A scene from "Better Call Saul."

Source: Better Call Saul | AMC

Television's favorite sleazy attorney may help AMC Networks succeed once again in the challenging world of scripted shows on cable, one analyst believes.

"Recent reviews that came out this week on 'Better Call Saul' (prequel to 'Breaking Bad') are favorable, suggesting sentiment may soon improve on the stock, placing it more in favor with investors this year," JPMorgan analyst Alexia Quadrani said in a price target upgrade on Friday.