Long AMC Networks $AMCX
Deep value + 20% near term buyback + 27% of float short + improving earnings QoQ
I know linear TV space well. This space consistently showed up when I was looking for deep value stocks over the past few years.
I have traded FOXA (last year), VIAC & DISCK (this year). All three have been profitable for me which gives me some comfort trading this sector. AMCX, the smaller of the lot was always cheaper but lacked catalyst. I always passed AMCX in the past despite being the cheapest.
Finally, Im long AMCX. I went long at 24.50 yesterday (mid point of the buyback range they announced yesterday).
AMCX closed at 25.18 with a market cap of $1.3Bio. It trades at 4.6X PE based on trailing 12months earnings (which includes 2 covid hit quarters). 4.6X of stressed earnings is clearly very cheap.
The financials don’t look that bad either to justify the multiple. AMCX has grown revenue low single digit over the years. Earning and cash flow growth has been much stronger.
AMCX has even done a good job at streaming with their niche products. They are looking to launch these globally as well.
https://www.fool.com/investing/2020/08/06/why-amc-networks-streaming-success-terrify-cable.aspx
So what has changed? They announced $250mio stock buyback to be completed in the next one month (fully using cash on hand). Price range has been set between 22.50 to 26.50. This buyback works out to 20% of outstanding shares over the next one month. Clearly now there is now a large near-term catalyst.
Add to this 27% of float is currently short. This is close to record short level in this stock. This ensures action over the next one month. 20% of float to be bought over a very short period of one month with 27% of float short should ensure fireworks.
This dynamic alone couldn’t send this stock surging. But if it doesn’t happen you have a very cheap stock were management is finally taking steps to unlock value. Which alone works for me anyway.
Q3 for media in general should see sequential improvement as well. From the industry commentary ads continue to see sequential MOM improvements. Q3 will also benefit from peak political ad dollars. A nice sequential improvement in earnings should help a cheap stock. AMCX is expected to announce Q3 results end October.
Bottomline: over the next 1.5months, there are multiple catalysts (buybacks+short covering+earnings) which could send AMCX surging.