Friday’s Top Upgrades (and Downgrades): AMC Networks Inc (AMCX), Activision Blizzard, Inc. (ATVI)

Page 1 of 2

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense and which ones investors should act on. Today, our headlines include an upgrade for AMC Networks Inc (NASDAQ:AMCX) and a higher price target for Activision Blizzard, Inc. (NASDAQ:ATVI). But it’s not all good news, so let’s start off with a quick look at why one analyst is…

Activision Blizzard, Inc. (ATVI)Not talking to Chuck
The big, bad news of the morning is that analysts at Compass Point have just issued a sell recommendation on Charles Schwab Corp (NYSE:SCHW) . Previously only neutral on the stock, Compass now sees a real possibility that Chuck’s shares will fall to $15, and recommends dumping the stock before it gets there. But could it be that Compass Point is steering you wrong?

I think so, and here’s why: According to Compass, its downgrade today was “primarily driven by valuation, as shares now trade at 20x our 2014 EPS estimate.” The analyst sees small investor trading as rather “lackluster,” and believes interest rates are unlikely to rise significantly in the short term, removing that potential catalyst for Schwab profits as well.

Be that as it may, I’m not sure there’s a strong case for actually selling Schwab at today’s prices. Although the stock looks pricey from a trailing P/E perspective, its price-to-free cash flow ratio is still less than 21 and its forward P/E ratio also looks attractive relative to projected 18% annual profits growth. Throw in a modest 1.3% dividend yield and, while I don’t think the stock is as cheap as it recently was, it’s still not so grossly overvalued as to require you to rush right out and sell it.

Mad about AMC Networks Inc
The story at AMC Networks Inc (NASDAQ:AMCX) looks even better, and kudos are due to the analysts at Maxim Group for pointing this out today. Maxim, you see, wrapped up the trading week with an upgrade to buy for the network behind such hits as “Mad Men” and “The Walking Dead.”

At first, this might seem like a strange call, what with AMC Networks Inc (NASDAQ:AMCX) costing “32 times earnings” and all. But here’s the thing: AMC generates a whole lot more cash from its business than its GAAP “earnings” let on. If the company got to report $136 million in such earnings last year, its actual free cash flow for the same period was $550 million — four times more!

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!