Barclays Capital thinks that there is more than a compensation dispute involved in the decision of DISH Network to drop AMC channels from its satellite system, and that AMC will prosper once carriage is restored.
Anthony DiClemente said that Barclays believes DISH has been using the dispute to gain the upper hand in an ongoing lawsuit over discontinuation of would-be satcaster competitor VOOM. The lawsuit involves AMC’s former parent Rainbow Media, and Barclays believes AMC is in an excellent position to win it.
Short term estimate for 2012 have been lowered due to the possible loss of three months worth of DISH-related revenue; however, estimates for 2013 have been raised. Shares are now being called Overweight and the target has been upped from $42 to $48.
DiClemente wrote, “Overhang from VOOM lawsuit provides an attractive entry point: We believe DISH’s decision to drop AMCX’s cable networks had little to do with viewership or rate, but was really an attempt to gain leverage in the ongoing VOOM lawsuit. We believe the facts in the VOOM lawsuit overwhelmingly support AMCX’s position and that carriage will eventually be restored as part of a settlement. Using conservative assumptions, we estimate a long-term carriage deal with DISH could be worth $5 per share to AMCX, and that cash consideration from a settlement could be worth another $2 per share.”
Barclays believes the “tailwind” from a settlement will more than compensate for immediate short term losses. It also likes the fact that the network is owning more of its serial programming, raising the possibility of entry into the potentially lucrative digital syndication market down the road.