Putting all macro elements aside, a look at AMC (AMC) stock’s year-to-date performance, would make you think you are looking at one of the year’s success stories. Of course, the 390% of accumulated share gains have little to do with real world action and are down to the stock being one of the names caught up in this year’s short squeeze frenzy.
However, while the 2021 gains so far are disconnected from reality, it is reasonable to think the U.S.’ largest theater chain operator is on its road back to recovery. After all, Covid-19 is slowly backing off and theaters are opening their doors, which should mark a turnaround in fortune.
That said, ahead of Wednesday’s Q4 earnings, Wedbush analyst Michael Pachter takes a more measured view of AMC’s prospects.
“We believe the company has sufficient liquidity to allow it to survive with low utilization through at least Q3, with NYC theatres reopening,” Pachter noted. “However, we think AMC may take years before it is able to revisit its prior growth strategy as it repays its growing mountain of debt.”
The debt has piled up so AMC could make it through the pandemic and stave off bankruptcy. The company still has $5.7 billion of debt it needs to payback. And that makes AMC, as Pachter notes, the “highest risk in the exhibition space given its exceedingly high debt balance, while the company has meaningfully diluted its shares between Q3:20 – Q1:21.”
As for what to expect from AMC’s earnings, it’s no surprise to learn the answer is not much. “Our Q4 estimates assume domestic admissions revenue per screen down 85% YoY vs. industry down 94% YoY,” the analyst said.
Pachter’s forecast calls for revenue of $141 million, compared to his previous $252 million estimate, while the Street has $155 million. Pachter’s EPS estimate has changed from -$4.39 to -$2.62, while consensus calls for -$3.61.
Looking ahead, Pachter expects a box office uptick as the summer season kicks in, and by Q4, expects theaters to start properly filling up again.
All told, Pachter rates AMC shares a Neutral (i.e. Hold), while the price target gets a meaningful bump. The figure moves from $2.5 to $5, although the revised target still represents a 52% drop from current levels. (To watch Pachter’s track record, click here)
According to the rest of the Street, an even sharper correction is anticipated. Going by the $3.83 average price target, shares are expected to shed ~63% of value in the coming year. The analyst consensus rates the stock a Hold, based on 3 Holds and 1 Sell. (See AMC stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
