Despite the absence of any Wall Street firm being bullish on AMC, the consensus suggests a potential upside of 76% from the current price.
- AMC stock forecasts a substantial 76% upside potential despite no bullish stance from Wall Street.
- Analysts remain predominantly neutral on AMC, with varying perspectives on its future trajectory.
- Barrington’s James Goss acknowledges positive developments but remains cautious, while David Trainer and Macquire’s Chad Beynon express bearish sentiments citing fundamental flaws and financial burdens.
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Wall Street consensus on AMC
Over the past three months, analysts covering the movie theater chain AMC have predominantly maintained a neutral stance on the company’s stock. Among the seven experts, four recommend holding the stock, while three suggest a strong sell.
The combined target prices of these analysts yield an average target price of $5.95 for AMC. Compared to the company’s share price as of April 26, this implies a significant upside potential of 76%.
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What the moderates are saying
The latest AMC coverage update comes from Barrington analyst James Goss. According to him, who has a neutral recommendation on the company, he sees AMC under the influence of the recent performance of the first quarter of 2024.
Although there are difficulties in comparing the company’s most recent quarter with last year’s due to production delays and a weaker holiday period at the end of 2023, some films such as “Dune: Part Two” and “Kung Fu Panda 4” were pleasant surprises. Goss also pointed out that although the box office was down 6% year-on-year, there is still potential for improvement over the second half of the year, which could be buoyed by better comparisons to previous strike-affected release slates.
The Barrington analyst is optimistic about the 2025 box office industry and its financial results as exhibitors anticipate a wider release slate compared to 2023. But uncertainty over how production might ramp up is holding him back from taking a more bullish stance on AMC.
In conclusion, the analyst believes that AMC has scenarios and profitability ahead. He sees an upward trend in equity values in the sector where cost control measures and a strong commitment to theatrical releases by studios and streaming companies.
Wedbush analyst Alicia Reese, who also has a neutral recommendation and a price target for AMC of $4 per share, recently acknowledged AMC’s recent quarter, which showed positive developments in terms of market share and EBITDA earnings. However, amidst these glimmers of hope, Reese doesn’t shy away from addressing the elephant in the room: AMC’s staggering loss of $150 million in free cash flow during the same period. This stark reality raises legitimate concerns about the company’s financial sustainability, particularly given its mounting debt obligations highlighting the daunting challenge of servicing over $3 billion in debt due within the next three years.
With such substantial liabilities looming, AMC finds itself at a critical crossroads, grappling with tough debt management and shareholder relations decisions.
“They’re not gonna have the cash to pay $3 billion in the next three years, so they’re going to extend some of those maturities pay down as much as they can issue shares. Shareholders are not gonna like that, and I’m sure it’s gonna continue to drop for a bit. Um but, you know, I don’t think that it’s necessarily a broken model. I do think with the share gains, and as the volume of content comes back, they do have a way forward. They just have to really try to find line.” Said Reese during an interview to Schwab Network.
What the bears are saying
Among the bearish voices, David Trainer, CEO of New Constructs, stands out for his stark assessment of AMC. Trainer paints a grim picture, labeling it a “zombie stock” within the market’s landscape. Trainer’s evaluation delves deep into the core of AMC’s business model, revealing fundamental flaws that cast doubt on its long-term profitability.
Trainer’s concerns stem from AMC’s fragile financial footing, characterized by a lack of substantial cash reserves necessary for sustained operations. He points to alarming burn rates and an inflated valuation, citing the company’s unrealistic expectation of capturing an unprecedented share of the box office market.
According to Trainer, AMC’s stock has yet to hit rock bottom, and he predicts a downward trajectory that could ultimately lead to its worthlessness, especially considering the significant debt burden it carries. While acknowledging the resilience of retail investors, often dubbed “apes,” who continue to rally behind AMC, Trainer remains skeptical about the sustainability of their efforts.
Macquire analyst Chad Beynon, who has a price target on AMC of $4 per share, also recommends selling the company due to a combination of factors affecting its performance and valuation. According to the analyst, AMC’s high leverage, with more than $300 million in interest and approximately $100 million in deferred rent, creates a substantial financial burden.
Additionally, despite operational improvements leading to record revenues per patron, the overall valuation of AMC’s stock appears inflated when compared to its peers, especially compared to Cinemark (CNK).
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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