Starz Has A Strong Opening On Wall Street, But Analysts Wonder What Happens Now?

Shares appreciated 9% to $15.69 in the first week after Liberty Media spun Starz off as an independent company. But its debut was also greeted by analyst reports that raised concerns about its prospects. Barclays Equity Research’s Chris Merwin initiated coverage today with an “equal weight” rating, and $15 price target. He fears that the premium pay TV network company won’t find a buyer or partner soon, and could soon see its profit margins shrink. Outlays for original programming will rise: Starz could have as much as 60 hours of originals in 2014, up from 38 hours this year — potentially raising next year’s production costs by 20% to $241M — the analyst says. In addition, execs soon will have to start negotiating to extend Starz’ movie carriage deal with Sony, which expires at the end of 2016. That could be costly. Starz needs Sony more than ever now that Disney has said it will move its films to Netflix beginning in 2016. And Merwin predicts that “other bidders, particularly Netflix and Amazon, could make competitive offers” for the studio’s films. (more…)

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