Media Stocks Showing 'Stress,' But Andy Hargreaves Is Positive On These Three Stocks

Any Hargreaves, a media analyst at Pacific Crest, commented in a note that he has a positive near-term view of the TV networks. Specifically, the analyst singled out AMC Networks, Twenty-First Century Fox and Netflix as being his "favorite longs."

AMC To Benefit From Ad Revenue Skew

Hargreaves continued that the distribution of ad revenue appears to be "skewing more heavily" to "top-performing content" and poses a threat to companies with "broader bases of good (but not great) content."

Specifically, the analyst singled out this as a positive trend for AMC Networks, as "The Walking Dead" is "the biggest show on TV," "Better Call Saul" received "very good reviews" and "Fear The Walking Dead" received "the highest-rated first season ever."

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Netflix Was ‘Right'

Hargreaves also noted that while an ongoing theme of pushing direct distribution is "worthwhile," it merely acts as a sign that Netflix is "right," and it's already dominant position in the streaming, on-demand music segment is "likely to mute the impact" from competitors.

At the same time, networks are attempting to mimic Netflix's model, and their efforts are expected to be margin dilutive due to the incremental costs to build and promote content.

Twenty-First Century Fox's Sports Assets Attractive

Finally, Hargreaves stated that Twenty-First Century Fox's sports assets should provide the company with "sustainable pricing power," that when coupled with an improved international profitability, should "drive solid profit growth."

Rating And Price Targets

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