Starz Entertainment: A Streaming Giant's Resurgence Amid Strategic Restructuring

The separation of Starz Entertainment from Lionsgate in May 2024 marked a pivotal moment for the streaming giant, positioning it as an independent force in a crowded market. With a renewed focus on subscriber growth and cost discipline, Starz has demonstrated resilience in the face of industry-wide challenges. This article explores why investors should take note of Starz's post-separation trajectory, particularly its ability to sustain subscriber momentum while navigating strategic restructuring.

Subscriber Growth: A Foundation of Strength

Starz's U.S. streaming subscriber base has been a bright spot in an otherwise turbulent year for streaming services. In Q4 2024 (ended March 31, 2025), the company added 530,000 U.S. OTT subscribers, bringing its total to 12.3 million—a stark reversal of prior declines. This surge was fueled by the Season 4 premiere of Power Book III: Raising Kanan, which drew in new users and reinvigorated engagement. Total U.S. subscribers (including linear TV) reached 18 million, a 2% sequential increase, underscoring the appeal of Starz's original content.

However, the picture isn't without challenges. Canada's subscriber base fell by 330,000 due to a carriage dispute, reducing North American totals to 19.6 million. Yet, this decline had minimal financial impact: Canadian linear subscribers generate “extremely low” average revenue per user (ARPU), allowing Starz to pivot without significant revenue loss.

Financial Fortitude Through Restructuring

Starz's restructuring post-separation has been ruthless yet purposeful. A $177.4 million fourth-quarter charge—primarily from content portfolio reassessments—highlighted its commitment to trimming non-core assets. By exiting international markets outside India and focusing on high-margin regions, Starz has streamlined its operations. The result? It met its $200 million Adjusted OIBDA target for fiscal 2025, with full-year results hitting $201.5 million.

Debt management is another triumph. Post-separation, net debt dropped to $559.1 million, and the company's leverage ratio improved to 3.1x, well within manageable thresholds. With a new fiscal year aligned to December 31, Starz is now positioned to report earnings per share (EPS) for the first time in Q3 2025—a milestone signaling its transition to standalone profitability.

Why the Bulls Are Right

1. Content-Driven Growth: Starz's library of hit shows, including Outlander and BMF, provides a steady revenue stream. Upcoming releases like the Outlander prequel Blood of My Blood and a new Spartacus series promise to attract subscribers.
2. Cost Discipline: By exiting underperforming markets and focusing on owned IP (to reduce content costs), Starz aims to lower annual content spending to $650 million by 2026—a $100 million reduction from 2025 levels.
3. Market Differentiation: Unlike ad-driven peers, Starz's ad-free model caters to a niche audience willing to pay for curated content—a strategy that resonates with loyal subscribers.

Risks, But Manageable Ones

Critics point to macroeconomic pressures, labor strikes, and the Canadian carriage dispute as headwinds. Yet, Starz's focus on high-margin markets and low ARPU exposure in problem areas means it can weather these storms. The stock's 24% surge post-earnings in May 2025 reflects investor confidence in its path to profitability.

Investment Thesis: Act Now Before the Surge

Starz's stock (STRZ) trades at $16.51, up over 5% in recent weeks. With a $200 million Adjusted OIBDA runway and a streamlined business model, the stock is poised for further gains. Analysts like Doug Creutz (Cowen & Co.) have already initiated coverage with a “Hold” rating, citing its low valuation and lack of ad-market exposure as positives.

Why Invest Now?
- Valuation: At 5x forward EV/Adjusted OIBDA, Starz is undervalued relative to peers.
- Catalysts: Upcoming content launches and deleveraging efforts will drive investor sentiment.
- Timing: The stock's post-separation surge has only just begun.

Conclusion: A Streaming Story Worth Betting On

Starz Entertainment's post-separation journey is a masterclass in strategic realignment. By focusing on profitable markets, pruning underperforming regions, and leveraging hit content, it has turned subscriber losses into growth. With a clear path to margin expansion and a stock primed for upside, now is the time to position in this undervalued streaming giant.

Investors should act swiftly—Starz's next leg upward won't wait forever.