How many more zombie scenes can the public take?

AMC Networks  (AMCX - Get Report) , scheduled to report its third-quarter earnings before the markets open Thursday, has pleased its investors despite nagging concerns about how long it can depend on its latest tentpole serial, The Walking Dead.

The New York-based cable network operator is expected to turn in a profit of 85 cents a share on $604.6 million in revenue for the quarter that ended in September, according to analysts surveyed by Thomson Reuters. During the same period a year ago, AMC earned 74 cents a share on sales of $520 million.

That growth has helped to propel AMC's stock up by more than 20%. Shares were slipping 0.4% on Wednesday morning to $76.70. Adding to the enthusiasm around AMC has also been the possibility that the company may be looking to expand its network reach with a bid for premium-cable TV company Starz (STRZA) . Even as a would-be acquirer, investors like AMC's outlook.

While AMC's shares have surged, the S&P 500 Index is up only about 2% on the year.

"The primary appreciation has to do with the operating performance of the company," said Guggenheim managing director Michael Morris. "They're doing well with affiliate fees [Morris estimates AMC gets 75 cents for every pay-TV subscriber] and The Walking Dead's ratings were strong in the first part of the year."

Indeed, adjusted operating cash flow at AMC's national networks, which include AMC, IFC and the Sundance Channel, surged 33% in the second quarter. But with AMC's respected and popular Mad Men ending its run earlier this year,  The Walking Dead has taken on new importance in the company's overall business, and the network is using the show to lure in more advertising dollars.

According to a survey of media-buying agencies by trade publication Variety, The Walking Dead commands an average price of $502,500 for a 30-second ad spot. That amount is 21.5% higher than a year ago, and among regularly scheduled programs is only less than the $637,300 that Comcast's  (CMCSA - Get Report) NBC receives for a commercial during Sunday Night Football and the $522,000 that 21st Century Fox  (FOX) received for a 30-second ad during Empire.

AMC didn't respond to several requests to comment on commercial rates for The Walking Dead.

"It's pretty important," said Rich Tullo of Albert Fried & Co., regarding The Walking Dead's importance to AMC. "They recently lost Mad Men. Better Call Saul is good, but it has about half the ratings."

AMC has been able to walk a tightrope in recent years, moving from breakout hit to breakout hit. Nonetheless, the possibility of Walking Dead viewer fatigue as they grow tired of watching heroes battling zombies and other apocalypse survivors appears to be more of a factor.

The Walking Dead made its season debut on Oct. 11. For what are called "live+3" ratings -- ratings that include those who watched the show via DVR recordings within three days of it airing -- The Walking Dead scored 19.5 million total viewers. In the crucial 18-49 age group, The Walking Dead tallied 12.9 million viewers, up 36% from a year ago, and a 10.1 share, according to media researcher Nielsen.

By the time The Walking Dead's third episode aired on Oct. 25, viewership had slipped, with a total of 18.2 million viewers, 12 million in the 18-to-49 demographic, and an 8.7 share.

Morris used The Walking Dead's ratings dip as the basis for recently cutting his price target on AMC's stock to $83 a share from $90. Morris said that AMC has other quality shows, but those don't yet have the ability to carry the network like The Walking Dead. Unsurprisingly, AMC thinks enough of The Walking Dead that it has renewed the zombie drama for a seventh season.

"In terms of its importance, it's very important," Morris said. "It's ratings are multiples of the company's other programs. And with the rate they are able to earn from advertising, it has such a reach that AMC is able to charge a premium [for ads] that is very warranted."

For its part, The Walking Dead airs on Sunday nights, and has been pitted against what have turned out to be a series of strong games on Sunday Night Football. There was also the Major League Baseball postseason and World Series to vie for viewers' attentions during the last several weeks.

"But you had the same types of competition last year," said Morris. "Things kind of run their course. You can only go back to the particular story well so many times. When the three-day ratings are off, it makes you think that if people were that passionate about the show, they would have watched sooner."


This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.