AMC Networks is a global provider of video entertainment products that are delivered to audiences, advertisers, and a platform of distributors. The company operates various national programming networks including the AMC, We tv, BBC AMERICA, IFC, and Sundance TV.

AMC Networks also provides a suite of subscription streaming services such as AMC+, Shudder, Sundance Now, and Acorn TV. In addition, the company is engaged in the film distribution business under the IFC Films, RLJ Entertainment Films, and Shudder brands.

The stock was recently downgraded by analysts at Morgan Stanley, who cited weak pricing power given the company’s smaller scale. As we’ll see, the consensus trend for earnings estimates shows a clear negative tilt.

The Zacks Rundown

AMC Networks AMCX, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Broadcast Radio and Television industry group, which currently ranks in the bottom 48% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.

Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

AMCX shares have been underperforming this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we approach the New Year.

Despite a quarterly earnings beat back in November, the company’s bottom line fell 50.8% year-over-year. Affiliate revenue decreased 13% due to basic subscriber declines, while advertising revenues fell 10% amid a challenging ad market and linear ratings declines.

Past Earnings Misses & Deteriorating Outlook

AMC Networks has fallen short of earnings estimates in two of the past three quarters. The company has delivered a trailing four-quarter average earnings surprise of -6.8%.

Consistently falling short of earnings estimates is a recipe for underperformance, and AMCX is no exception.

The entertainment company has been on the receiving end of negative earnings estimate revisions as of late. Looking ahead to fiscal 2025, analysts have slashed estimates by a whopping -37% in the past 60 days. The Zacks Consensus EPS Estimate is now $3.15 per share, reflecting negative growth of -23% relative to the prior year.

Image Source: Zacks Investment Research

Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.

Technical Outlook

As illustrated below, AMCX stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 200-day (red line) moving average – another good sign for the bears.

Image Source: StockCharts

AMCX stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average (blue line) crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 50% this year alone.

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that AMCX is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.

Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of AMCX until the situation shows major signs of improvement.

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