FBN Initiates Starz With Sector Perform Rating

In a report published Wednesday, FBN Securities analysts initiated coverage of Starz. (NASDAQ: STRZA) with a Sector Perform rating and a current fair value per share of $42.67.

Starz has performed well since its separation from Liberty Media Corp (NASDAQ: LMCA) and the momentum is expected to continue in the near future. The company has been actively repurchasing its equity shares offering leveraged returns to its shareholders.

The analysts expect the company's subscriber base to expand significantly in the future. "Starz is the only directly investable pure play premium cable network operator," the analysts stated.

In the report FBN Securities noted, "The core Starz and Encore premium networks reached over 57.3 million combined domestic subscribers as of 12/31/14 and due to the growing popularity of Starz's original programming, this number should only grow as internationally Starz has only scratched the surface with a few syndication deals and the recent launch of Starz Play Arabia."

The analysts expect Starz to enter into more fixed rate deals with its distribution partners. "Such deals assure a certain level of revenues and cash flows and mitigate risks associated with the company's investments in high quality original programming.

"In addition to the potential for more sizable high margin fixed rate deals, on February 11, 2015 Starz major shareholder Dr. John C. Malone agreed to a swap transaction with Lionsgate that could be a precursor to an eventual merger of the two entities," the analysts added.

More international deals in the future are expected to materially help Starz's long term equity value.