AMC (AMC) might be lacking cinema goers, but it has recently done an excellent job in providing enough drama and action to keep any avid market watchers satisfied.
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The company is one of several struggling names with high short interest, which retailers have recently adopted and helped send shares stratospheric. The buying frenzy has triggering a short squeeze – when short sellers are required to close the position and buy shares to cover their positions – thereby causing a feedback loop.
What appears to be getting lost amidst the madness, is the precarious position AMC has found itself in due to the pandemic’s ruinous impact. While some of its theaters are open, attendant rates in the current climate are unsurprisingly low.
The fact movie release schedules have been pushed back, hasn’t helped matters either. As a result, B Riley analyst Eric Wold recently lowered his 2021 and 2022 revenue and AEBITDA estimates.
That said, looking further ahead, the analyst expects cinema goers will be compensated in 2H21 and 2022, and anticipates “an extremely IMAX-friendly slate.”
Movies expected to hit IMAX screens this year include the new Bond film No Time to Die, Black Widow, Fast & Furious 9, Venom 2, Suicide Squad and Top Gun: Maverick, amongst others. Wold, in general, expects releases to “over-index in the format.”
This is good news for AMC, as Wold explained.
“Keep in mind that as of 3Q20, AMC operated 188 IMAX screens across the U.S., which represented ~46% of the premium format’s domestic network,” the 5-star analyst said. “Therefore, given our positive expectations around the likelihood for IMAX to over-index domestic box office growth in 2H21 and 2022, we expect this to provide an incremental box office tailwind for AMC’s domestic theaters.”
Further bolstering the positivity, recent liquidity boosting actions through equity raises and debt financing have improved the company’s financial position. Wold also believes the coronavirus has perversely had a positive effect and forced the company to evaluate “every dollar going out the door and reevaluate all aspects of the business.” Wold, therefore, expects AMC to emerge post-covid with a “stronger operational profile.”
All in all, while Wold sticks to a Neutral (i.e., Hold) rating on AMC shares, he raised the price target from $3.5 to $5.5. Yet, this figure still suggests potential downside of 40%. (To watch Wold’s track record, click here)
According to the rest of the Street, an even sharper descent is in the cards. Going by the $2.89 average price target, shares will slide by 85% over the next 12 months. Overall, the stock has a Hold consensus rating, based on 4 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.
