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Why AMC Networks Stock Crashed Today

By Anders Bylund - Feb 26, 2020 at 3:00PM

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The content producer posted weak earnings and strong sales, and investors hurried to focus on the downside.

What happened

Shares of TV-content producer AMC Networks (AMCX 1.87%) traded 13.3% lower at 2:20 p.m., EST. The company reported fourth-quarter results this morning, missing Wall Street's earnings estimates despite a strong showing on the top line.

So what

The producer of hit shows like The Walking Dead and Better Call Saul reported fourth-quarter sales of $785 million, 1.2% above the year-ago quarter. Adjusted earnings fell 12%, to $1.69 per share. Your average analyst had been looking for earnings near $1.78 per share on revenues in the neighborhood of $776 million.

A businessman watches a large red arrow crashing down through the floor at his feet.

Image source: Getty Images.

Now what

The bottom-line miss was the result of higher operating costs, as AMC Networks expanded its international streaming-services platform, which also explained the impressive top-line results. Investors were quick to hit the sell button, ignoring the fact that AMC Networks is sacrificing some bottom-line profits in order to boost its long-term revenue growth in the skyrocketing market for video-streaming services.

The stock now trades at a dirt cheap 3.1 times trailing earnings, or 4.2 times free cash flows. I think that's a fantastic price for a strongly profitable company with clear growth prospects as the streaming market evolves before our eyes.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends AMC Networks. The Motley Fool has a disclosure policy.

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AMC Networks Inc. Stock Quote
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