AMC Networks stock dropped 15% to $14.41a share on Friday after the company forecast 6% lower revenues for 2024.
On its fourth-quarter earnings call AMC said that it would be reducing cash spending on programming to $1 billion from $1.1 billion in 2023. The company’s cost cutting will result in higher cash flow, however.
CEO Kristin Dolan was optimistic that the company could increase revenue at some point in the future.
“As the marketplace sorts itself out, the opportunity to grow top line, in the out years continues to be there, I think it's just got to settle. So we're sort of sticking to our knitting, as you said, tight cost management, but effective utilization of the resources that we have,” Dolan said on the call.
Analyst Steven Cahall of Wells Fargo lowered his price target for AMC shares to $11 from $13 because the company’s forecasts were below expectations.
"AMC Networks faces increasing pressure to earnings, and we reduce estimates to reflect the lower guide,” Cahall said in a note Friday. “We think its lack of scale and industry challenges limit forward visibility on adjusted operating income before depreciation and amortization stabilizing.”
AMC CFO Patrick O’Connell said the company expects to generate total revenue of about $2.4 billion in 2024, down 6%. That excludes 2023 revenue from its low margin 25/7 Media unit, which was sold, and revenue it generated by selling the series Silo to Apple TV Plus.
Streaming revenue is expected to grow in the high single-digit to low double-digit range in 2024, he said.
Meanwhile advertising revenue is forecast to drop in the high-single range, O’Connell said. Affiliate revenue is expected to decline 10%.
“Despite the expected decline in revenue, our continued cost measures and prudent investments lead us to expect only a slight decline in margins, he said.
O’Connell said the bright spot would be that AMC expects cash flow to increase from $231 million. Over the next two years combined, the company forecasts generating $500 million in cash flow.
On the call Dolan talked about AMC’s arrangement to put some of its shows on Warner Bros. Discovery’s Max streaming platform.
“We were thrilled with the increases in viewership that our content received, both on Max, but then also the associated lift in the more current seasons,” she said. she said. “ I think they were pleased with hopefully some positive retention and engagement on the Max side. And we were certainly pleased with the learnings and the increased viewership that we got on AMC+ for those series.”
“What what that experiment showed us was that when we get onto a larger distribution platform and a bigger ecosystem, our content scale scales significantly, and is as appealing and more so than then even, in our own ecosystem,” O’Connell added.