AMC Networks Inc.’s stock AMCX, -3.87% tumbled 3.7% Thursday, after Goldman Sachs downgraded the stock to sell from neutral and said it expects it to underperform its peers. Analysts led by Drew Borst cited two main reasons for the move; weakness in national networks advertising due to declining ratings for flagship “The Walking Dead” and competition for scripted original series and viewers; and margin pressures stemming from slower revenue growth and higher content and marketing costs. “While AMCX’s valuation is not challenging at 8X near-term P/E, this is largely in-line with AMCX’s recent trading history,and we do not see a near-term catalyst to drive a multiple re-rating,” they wrote in a note. The stocks’ recent rally is mostly based on expectations for a deal, “view, but we are skeptical about a premium take-out in the near-term because AMCX is a controlled company and there is limited strategic value for an ad-supported basic cable network with a minimal content library. We would become more positive on AMCX if the ratings declines reversed and it developed a meaningful new company-owned hit series,” said the note. AMC shares are up 19% in 2018, while the S&P 500 SPX, -0.88% has gained 9%.
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