Starz Is Shining Bright

The largest premium cable business around continues to add subscribers and maintains a robust development pipeline. What's not to like?

Feb 24, 2014 at 8:45PM

Liberty Media spin-off Starz (NASDAQ:STRZA) continues to prove a phenomenal investment. Subscriptions for both Starz and Encore are on the rise -- adding to what is already the largest premium cable business around and helping bring the company's earnings up a massive 42%. The distribution arm isn't moving too quickly at the moment after having a more productive period a year ago, but that's OK as things look to continue growing healthily in the coming periods. Since its market debut as stand-alone company last year, Starz's stock has more than doubled from its $14 entry. Though the cable industry is in the midst of disruption, this may still be a great bet for investors.

High ratings
Starz and Encore make up the largest subscriber count in the premium cable industry, showing far greater numbers than Time Warner's HBO as well as CBS' Showtime. At this point, Starz has 22.2 million subscribers while Encore rose to 34.9 million. Starz led the charge with a million new subs, while Encore only brought on roughly 100,000.

The appeal of today's premium cable businesses revolves primarily around the original content offerings that many consider to be far, far superior to regular cable and network series. Starz has introduced a few new series in the past year and has plenty more in the pipeline, competing head-on with HBO, Showtime, and now Netflix and Hulu.

Sales ultimately fell 2%, though this was due to the distribution arm and fewer projects at Starz's animation studio, Film Roman.

Still a star
With more than 57 million total subscribers and strong results from its recently introduced series, Starz is in a great position to keep things moving forward in the future. The company debuted  its Michael Bay-produced pirate drama, Black Sails, to an average of 2.9 million viewers. This marks the strongest start to any Starz original series.

In the development pipeline are projects backed with serious celebrity ammo, from a 50 Cent-helmed project titled Power to a Lebron James/Tom Werner half-hour comedy called Survivor's Remorse, Starz will attract new viewers by curiosity if nothing else. What does a Lebron James comedy even look like?

Original programming is on track to grow its total hours by 65-75 in the coming years, according to CEO Chris Albrecht.

The bottom line
With the company's continued focus on content (including a great development team) and reaching more subscribers via new platforms such as Xbox One, there is little reason for Starz to slow down. What's better is that the potential for substantial growth is offered to investors for under 15 times forward estimated earnings. Direct comparisons are difficult considering that it is the only stand-alone premium cable business, but Starz doesn't look expensive on any front. HBO-parent Time Warner trades at 14.4 times earnings and Netflix is out of the ballpark with a forward P/E of 60 times. Of course, the latter will grow much faster than any of its peers mentioned here, but Starz's generous cash flow and earnings growth is nothing to shake a stick at.

All in all, this is one cable business with a bright future. While that may sound like an oxymoron these days, Starz's robust production and subscriber base illuminate just how much potential the stock holds.

More from The Motley Fool 
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers