AMC Networks, home of “Mad Men” and “Breaking Bad,” is spinning off from parent Cablevision at the end of this month and its valuation is looking as good as Don Draper in a gray business suit, according to one analyst.
“AMC has multiple hit shows (Mad Men, Breaking Bad, Walking Dead and The Killing) and is pursuing the launch of a fifth (Hell on Wheels) in fourth quarter 2011,” said BTIG’s Rich Greenfield, one of the top media analysts on Wall Street, in a note. “With the content pendulum swinging in AMC’s favor, we believe AMC has the ability to drive notably higher advertising sales over the course of the next couple of years.”
The New York cable company run by the Dolan family approved the spin-off earlier this month. AMC Networks Inc., which also includes WETV and IFC, will trade under the ticker ‘AMCX’ on July 1st.
AMC has taken a page from the playbook of Time Warner’s HBO by focusing on original series, shedding its “American Movie Classics” image of Saturday afternoon reruns. The network’s tagline is “Story Matters Here.”
Along with strong ratings, Greenfield likes that the stock is trading for under 10 times his 2012 free cash flow estimate. The analyst believes the chances of a share repurchase are likely in 2012 and that the company could be purchased outright in 2013.
In March, AMC signed a deal with Lionsgate, the production company for the “Mad Men” series, to keep the Emmy-award winning show on the network for three more years. Actor Jon Hamm, who plays the dapper Don Draper, signed on for three years this week.
Lionsgate hasn’t gotten much of a lift from Mad Men, bogged down by weakness at its movie studio division and a protracted fight with corporate activist Carl Icahn. The stock is little changed over the last 12 months. However, four of the eight analysts that cover the shares rate it a “buy.”
Mad Men is “a drama about one of New York’s most prestigious ad agencies at the beginning of the 1960s, focusing on one of the firm’s most mysterious, but extremely talented ad executives, Donald Draper,” according to IMDB.com.
The ratings success of the series featuring the swank 60s lifestyle of smoking, drinking and womanizing inspired NBC Universal to add “The Playboy Club” to its fall line-up. Coincidentally, NBC’s (and CNBC’s) parent Comcast also got an analyst endorsement today as the stock was added to Goldman Sach’s Conviction Buy List.
“Ratings for the (NBC cable) networks remain healthy, with USA leading primetime ratings and a full set of original scripted series set to boost the net through the traditionally slower summer months,” said Goldman analyst Jason Armstrong in a note. “Though NBCU broadcast has several structural challenges to work through, with a primetime line up that continues to lag peers, we believe the potential for significant upside rationalizes the upfront costs.”
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