Text size
Movie assistants wearing protective masks at the AMC cinema at the Westfield Century City mall in Los Angeles.
Bing Guan / Bloomberg
AMC Entertainment Holdings
wants everyone to know that it is back in shape after the reopening in Los Angeles and New York, but some analysts remain skeptical about the stock price.
The shares fell more than 9% on Tuesday after Citigroup analyst Jason Bazinet reiterated its sale rating for the shares, with a $ 2 price target. The shares rebounded slightly and are now trading at around $ 13.
Lately, there has been a lot of good news for AMC (ticker: AMC) and other theater operators. Trade restrictions are easing in the US, as vaccinations spread and people cautiously return to more normal conditions.
Late-release films last year are expected to open in theaters in the coming months, hopefully attracting audiences despite occupancy limits.
AMC exceeded expectations for the fourth quarter, and CEO Adam Aron told analysts last week on a results conference call that he shifted his focus from survival to “directing an increase in people going to the movies and the recovery of AMC, goals that seem to us to be around the corner. ”
And AMC has managed to sell stocks and debt to raise more than $ 2.2 billion in cash since last fall, so it can face the pandemic, according to Benchmark analyst James Goss, who has a Market Perform rating for the shares.
“AMC has taken several steps to improve its financial position.” Goss wrote in a note this week. “However, significant uncertainty remains for the company.”
Some investors are apparently buying immune to these warnings. AMC’s shares have been a favorite of the so-called crowd of meme stock retailers. Some of these investors will be entitled to $ 1,400 federal stimulus checks and will be able to use the money to buy more shares.
Still, Wall Street analysts like Bazinet see the AMC as overvalued.
An AMC spokesman did not respond to requests for comment.
The cinema chain has fallen in recent weeks, with its stock sometimes increasing by double-digit percentages in optimism about the economic reopening, and dropping in the same proportion for fear that the reopening will not happen fast enough.
Case in point: AMC shot up 25% on Monday, when the company said it was opening two large cineplexes in Los Angeles.
AMC’s shares have risen 415% since last year, compared to a 57% one-year gain on the S&P 500.
Analysts pointed to the company’s $ 5 billion debt and estimated earnings per share in 2021 and 2022, which is still below 2019 levels.
“We see the company’s high leverage as an additional risk to an uncertain recovery,” Citi’s Bazinet said in a note on Tuesday. “And, we see recent developments in the industry, indicating that the strategic role of exhibitors is diminishing.”
Several analysts have set low price targets for the shares. Credit Suisse has a target of $ 1.55, while Macquarie estimates it at $ 5 per share (over $ 4). MKM Partners downgraded the shares for Sale in February, with a price target of $ 1.
The most aggressive call so far came last week from Richard Greenfield of LightShed Partners, who said it was a sale with a target of 1 cent. Greenfield’s view is that habits of going to the movies have changed permanently.
Hollywood put pressure on the theater industry by launching its new films on streaming services, either on the same day as the cinema release or after a significantly shorter exclusive season.
Cinemark Holdings
(CNK), the third largest theater chain, did not exhibit
Walt Disneyin
(DIS) new Raya and the Last Dragon earlier this month, and some reports said he was protesting this streaming launch strategy.
But it remains to be seen whether consumer preferences for home entertainment can be overcome after a year of pandemic-induced blockages. Studio executives said they are committed to the streaming model, notes Greenfield. And consumers accepted it.
“As consumers return to theaters (in addition to the initial explosion of seeing anything and everything outside the home), we believe that they are likely to be much more selective in what they pay to see in the cinema,” said Greenfield.
Write to Liz Moyer at [email protected]