'Fear The Walking Dead' Sets Records, But Is AMC A Buy?

• AMC Networks Inc AMCX shares lost 12 percent over the past week.
• Pacific Crest’s Andy Hargreaves maintained an Overweight rating on the company, with a price target of $83.
• Fear The Walking Dead set an all-time record for cable debut, Hargreaves said, adding that there was upside to the Q3 estimates.

According to Nielsen, an estimated 10.1 million people tuned in live for the series premiere of Fear The Walking Dead (FTWD) on Sunday, beating the record set earlier this year by AMC's Better Call Saul. The Nielsen figure was significantly higher than the Pacific Crest estimate of about 5 million viewers.

Analyst Andy Hargreaves said that the beat could create upside to the Q3 estimates if FTWD is “able to maintain comparable audiences for the remaining five episodes in season one.”

Although FTWD is a prequel to The Walking Dead, it could “help ease investor concerns about what happens after the Walking Dead ends its final season, which is a question we get often given the outsized financial impact it has for AMC,” Hargreaves wrote.

The analyst believes that the record debut of FTWD, along with the early success of Better Call Saul and remaining episodes of The Walking Dead, positions the company for continued outperformance in domestic advertising growth relative to other network peers over the next one to two years.

In the report Pacific Crest noted, “We currently forecast AMC's Q3 U.S. Networks advertising revenue to grow $27 million y/y to $165 million. This growth estimate largely accounts for AMC's acquisition of BBC America and calls for roughly flat advertising at AMC's legacy networks.”

Hargreaves believes that AMC's focus on high-quality scripted originals positions it “to perform well” not only in a weak ad environment, but also in a market that is “transitioning to more on-demand entertainment.”