Starz (STRZA) is the last independent pure-play premium TV channel. The short-term driver for the stock price will be the realization that Starz is not getting the respect it deserves on the multiples front. However, over the interim, we believe the likelihood is high that other media companies and content generators will realize Starz's undervaluing and swoop in and buy out the company.
The key benefit for Starz is its high-margin free cash flow generating capabilities, being an asset-light business with high-margins. Starz is a great spinoff investment opportunity; one that might not be available for long. The stock is trading around $23, but we see the upside target of $41, appreciation of 80%....
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