Stock Trade of the Week: AMC Networks (AMCX)

AMC Networks (Nasdaq: AMCX) – operates a number of cable television networks both in the United States and abroad. The company has its own AMC network as well as WE tv, BBC America, IFC, and Sundance TV. In addition to offering the channels through traditional cable providers, AMC also offers its customers streaming options for its networks. AMC Networks is headquartered in New York and it was founded in 1980.

AMC has seen its earnings grow by an average of 18% per year over the last three years and earnings increased by 14% in the most recent quarter. The company is set to announce its first quarter results on May 1.

Sales for AMC have grown at a rate of 4% per year over the last three years and they grew by 4% in the most recent quarterly report.

Analysts expect the company to show sales growth of 4.4% in the report due out next week.

The management efficiency measurements for the company are solid with a return on equity of 90.3% and a return on assets of 10.1%.

The profit margin is at 24% and the operating margin is at 28.1%.

Despite the strong earnings growth and the solid management efficiency numbers, the sentiment toward AMC Networks is incredibly bearish.

There are 20 analysts following the stock with only four “buy” ratings. There are 11 “hold” ratings and five “sell” ratings on the stock. The short interest ratio is incredibly high at 13.4. Remember, bearish sentiment currently can turn to bullish sentiment in the future and that can help drive the stock higher.

The weekly chart for AMC shows that the stock has been trading mostly between $55 and $67.50 over the last 11 months with a few dips below the range and a few trips above the upper end of the range. The stock recently moved back above its 104-week moving average, but is sitting below its 52-week moving average.

The weekly stochastic readings recently dipped down below the 50 level and the indicators have now made a bullish crossover. I think this is a good sign for the stock and given the bearish sentiment toward the stock I look for AMC to break out of the range it has been in. With earnings due out next week, that could be the catalyst that gets the stock out of its range.

Suggested strategy: Buy AMCX with a maximum entry price of $61.00. I would set a target of at least $82.00 over the next 6 to 9 months (for a potential return of 40% from here). I would also suggest a stop at $55.00.

— Rick Pendergraft

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