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AMC Entertainment reports fourth quarter earnings on Wednesday.
Angela Weiss / AFP via Getty Images
Cinema operators hope that the spread of vaccines and more flexible restrictions at public meetings will help their businesses recover after a bleak 2020 year, but not all networks are the same.
AMC Entertainment
Holdings (ticker: AMC), the largest US theater operator, has raised more than $ 1 billion in cash through share sales and convertible debt businesses since the fall to build a mattress until business can get back to normal . But that puts you at a disadvantage, according to Richard Greenfield of LightShed Partners.
The analyst started AMC’s shares in a sale on Wednesday, setting a price target of 1 cent, saying the company’s multiple is not justified given its indebtedness and cash flow.
The company is likely to discuss its expectations for the impact of mass vaccinations and the reopening of the economy when it announces profits on Wednesday night after the bell. Last month, CEO Adam Aron said that the reopening of cinemas in New York – with some restrictions related to Covid – was “another important step in restoring the health of the film industry and our company”. In January, Aron dismissed the need to file for bankruptcy after the company raised more cash.
AMC shares, which were caught up in Robinhood’s retail market frenzy, rose 13.2% on Wednesday in volatile trades. But they lost momentum and rose just 2.4% to $ 10.75 on a recent check. They have increased by around 400% so far this year compared to the
S&P 500’s
4% gain accumulated in the year.
By Greenfield’s calculations, at Tuesday’s closing price of $ 10.50, AMC’s shares are trading at more than 15 times the estimated adjusted earnings for 2022 before interest, tax, depreciation and amortization or Ebitda. And this Ebitda is “in secular decline from that point on, with no effective free cash flow and debt to EBITDA of more than 8x,” he said in a note.
He called the shares “drastically overvalued”.
Analysts monitored by FactSet expect AMC to report a fourth-quarter loss of $ 3.24 per share in the quarter, with anemic revenue of $ 142.3 million. For the year 2020, the forecast is a loss of $ 31.18 per share on sales of $ 1.2 billion.
For the full year 2019, AMC reported a loss of $ 1.08 per share on sales of $ 5.55 billion. In 2019, AMC reported an adjusted EBITDA of $ 771 million, Greenfield said, but he predicted that the same metric for 2022 will struggle to reach $ 600 million.
It is not just a persistent reluctance of some viewers to return to cinemas in person without knowing the vaccine status of those sitting around them, he argued. Hollywood studios have changed consumer habits by releasing new movies via on-demand streaming at home and shrinking or narrowing the theatrical release window.
This means that predicting box office sales for AMC’s domestic and international screens is tricky. Greenfield estimates a high single-digit gain in 2019 for AMC’s domestic sales in 2022 (he is ignoring 2020 and 2021 because of the pandemic). But he adds: “Honestly, it looks like it could be significantly worse.”
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