AMC Networks (AMCX) Stock Trades Down, Here Is Why

What Happened:

Shares of television broadcasting and production company AMC Networks (NASDAQ:AMCX) fell 31.1% in the morning session after the company announced plans to sell $125M aggregate principal amount of convertible senior notes due 2029 in a private offering.AMCX intends to use proceeds from the sale for general corporate purposes, which may include debt repayment. 

Rising interest rates have raised the borrowing cost for companies, and AMCX's debt issuance is likely being met with skepticism by investors. The market could be worried about the cost of managing the debt, including interest payment, given its declining sales growth. Also, there could be concerns about the potential dilutive effect of the convertible notes, which can be converted to the company's common stock, raising the total share count.

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What is the market telling us:

AMC Networks's shares are quite volatile and over the last year have had 45 moves greater than 5%. But moves this big are very rare even for AMC Networks and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the company dropped 20.7% on the news that the company reported fourth-quarter results with operating income and EPS falling below Wall Street's expectations. 

On the other hand, revenue beat by a small margin, though it continued to decline in the absolute term, falling by 29.6% year on year. The decline was mostly driven by the domestic operations business, which fell 32% year on year. International revenue also fell 9% yearly, showing broad-based topline weakness. 

A bright spot was that free cash flow came in better than expected. From a product perspective, the company pointed out that AMC+ (the streaming platform) launched "an ad-supported tier in the third quarter, with strong new sign-up activity on available platforms since launch." 

Overall, this was a weak quarter for the company, which continued to endure industry-level headwinds given the growing shift from traditional TV to streaming services.

AMC Networks is down 44.4% since the beginning of the year, and at $10.69 per share it is trading 48.2% below its 52-week high of $20.62 from December 2023. Investors who bought $1,000 worth of AMC Networks's shares 5 years ago would now be looking at an investment worth $193.72.

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