Shares of AMC Entertainment (NYSE:AMC) recently experienced a significant surge, registering a growth of over 100% within a few days at the start of May. This unexpected uptick is attributed to the revived interest of the online investor community, popularly referred to as the meme-stock frenzy. However, recent box office performance has been disappointing. Over the Memorial Day weekend, revenue declined by 37% from 2023 figures, generating only $128 million in ticket sales, marking the lowest point since before 2000.
In addition, according to S&P Global Market Intelligence, the percentage of Americans visiting movie theaters more than once a month has dropped from 23% in 2019 to just 15%. Recent meme-stock surge aside, AMC is battling to find solid footing in a declining market. The stock has been down over 98% in the past three years. As such, long-term investors may want to leave this one to the speculators with “diamond hands” for now.
AMC Leads the Market
AMC is recognized as the world’s largest movie exhibition company and a leading force in the industry, with a considerable footprint stretching across approximately 900 theaters and 10,000 screens globally.
The theater chain has sparked significant innovation in the sector by deploying Signature power-recliner seats, which enhance the traditional movie experience. Furthermore, AMC has worked to foster greater guest engagement with loyalty and subscription programs, a well-managed website, and mobile apps.
AMC’s stock became a favorite of retail investors during the original meme-stock craze, with its shares surging more than 2,800% between the end of 2020 and June 2, 2021.
AMC’s Recent Financial Results
The company recently reported financial results for the first quarter of 2024. Total revenue stood at $951.4 million, a slight decline from Q1 2023’s $954.4 million. However, the company’s net loss shows improvement at $163.5 million from a more significant loss of $235.5 million in Q1 2023. The net loss per diluted share has also decreased to $0.62 from $1.71 in Q1 2023. Notably, the adjusted EBITDA was -$31.6 million compared to $7.1 million in Q1 2023, a shift connected to a previous $16.7 million benefit due to an early termination of a theatre lease.
Despite these figures, the company continued to expend its cash reserves. Cash and cash equivalents at the end of Q1 2024 were $624.2 million, a significant reduction from $884.3 million at the end of 2023, marking a 29.4% quarter-on-quarter reduction. The company continues to carry a sizable level of debt of roughly $8.5 billion.
However, the firm did engage in some notable capital market activities. For instance, AMC exchanged $17.5 million of the second lien notes due 2026 for 2.5 million shares of Class A common stock in Q2 2024 and raised $124.1 million by selling 38.5 million shares of Class A common stock by early May 2024. Furthermore, the company concluded its “at-the-market” equity offering, successfully raising $250 million by selling 72.5 million shares at an average price of $3.45 per share.
What Is the Price Target for AMC Stock?
Analysts following the company have been moderately bearish on the stock. Wedbush analyst Alicia Reese recently assigned a price target of $3.50 on the shares while reiterating a Neutral rating. She alluded to the company’s heavy debt load, which will likely absorb any positive growth in the next few years.
Overall, AMC Entertainment is rated a Moderate Sell based on the ratings and price targets issued by six analysts over the past three months. The average price target for AMC stock is $4.90, representing a 1.87% upside from current levels.
The stock has been highly volatile over the past few years, and the recent meme-stock surge has continued that trend, pushing the shares up over 22% in the past 90 days. The stock currently trades at the low end of its 52-week price range of $2.38-$48.50 and shows positive price momentum, trading above its 20-day (4.35) and 50-day (4.10) moving averages.
The company’s EV to Revenues of 1.08 suggests it is trading at a discount, as it is significantly below its historical average of 9.77 and well below the Entertainment industry average of 2.74.
AMC Stock in Summary
Despite a recent surge in interest driven by the meme-stock frenzy, AMC Entertainment is grappling with a declining market. That downward trend is exacerbated by the company’s decrease in revenue and cash reserves, alongside a sizable debt level.
However, the company has been proactive in capital market activities, raising significant funds to try and counter the toll due to the heavy debt load. While it trades at a value, long-term investors may want to look for better opportunities elsewhere.
