Theater chain expected to report a 12th consecutive quarterly loss, but sales are expected to top $1 billion thanks to ‘Avatar: The Way of Water’
AMC Entertainment Holdings Inc.’s stock jumped more than 21% Monday on the eve of the meme-stock darling’s fourth-quarter earnings.
The movie theater chain’s stock has rallied recently, climbing 46.2% in the past five days. However, AMC’s Preferred Equity units APE, -5.09% fell 3.9% Monday and have fallen 13.5% in the last five days. The S&P 500 index SPX, +0.31% rose 0.2% Monday and has fallen 2.5% in the last five days.
Analysts surveyed by FactSet expect AMC AMC, +22.74% to disclose a fourth-quarter loss of 21 cents a share, or a loss of 19 cents on an adjusted basis, when the company reports results after market close Tuesday. Sales are expected to be $1.027 billion, according to FactSet, with a boost from Walt Disney Co.’s DIS, +0.15% “Avatar: The Way of Water,” which has become a top-5 film of all time at the box office.
AMC’s path to recovery could be helped by an increase in movies released in theaters this year, according to CEO Adam Aron. He recently noted that 35% more movies will be released in 2023 than in 2022, as the movie-theater industry attempts to recover from COVID-19-related slowdown.
Wedbush analyst Alicia Reese wrote in a Monday note that theatrical exhibition is “on the path to normalization,” with an improving slate of releases in 2023.
“AMC has plenty of cash to continue operating through an improved theatrical environment in 2023 with its vast network of premium large format screens, while chipping away at its massive debt balance,” she wrote. “AMC is likely to continue expanding with high-quality screen acquisitions as they become available from faltering competitors, while continuing to dip into various new business ventures to drive new incremental revenue streams.”
Wedbush rates AMC underperform with a $2 price target.
The company is also engaged in a battle to eliminate its debt burden. In an SEC filing last month, AMC announced a special meeting of shareholders to increase the number of AMC authorized shares from just over 524 million to 550 million and authorize a 1-for-10 reverse split of the company’s common stock, converting APEs into shares of common stock. The special meeting of shareholders is scheduled for March 14, 2023, according to the SEC filing.
AMC has been on a roller-coaster ride over the past two years that has taken it from beleaguered pandemic victim to meme-stock phenomenon. The company used the steep rise in its share price to tap into equity and debt markets, raising $917 million in January 2021.
In November, AMC announced its 12th consecutive quarterly loss. The company’s sales were $968.4 million, compared with $763.2 million in the same period last year. AMC exited its fiscal third-quarter with debt of $5.325 billion and with cash and cash equivalents of $684.6 million.
AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.
The movie theater chain’s stock has risen 85% this year, although David Trainer, CEO of independent equity research firm New Constructs, believes that AMC is a “zombie” stock at risk of declining to $0 per share. “This rally is totally unjustified and shows that many investors still haven’t learned their lesson on how to allocate capital intelligently,” he said, in a note Monday. “This rally is an opportunity for those that have risked owning this stock to sell it before it craters.”
“AMC Entertainment’s stock is at risk of declining to $0 per share because of its large free cash flow burn, inadequate profits to cover its debt interest payments, poor competitive position and inability to sustain positive cash flow for a meaningful period of time,” Trainer added.
Of seven analysts surveyed by FactSet, three have a hold rating and four have a sell rating for AMC shares.