AMC Entertainment Holdings Inc.’s first-quarter results gave analysts reason to be optimistic about the theatrical industry’s recovery, but most analysts believe the share price is still far too high to issue a buy recommendation.
The stock AMC,
fell 5.4% to close at a yearly low of $11.84 on Tuesday, reversing an intraday gain of up to 11.9%. The stock has plummeted 24.7% in a four-day losing streak.
AMC late Monday reported a larger-than-expected first-quarter loss, but revenue rose more than five-fold to beat forecasts as growth in admissions revenue outpaced growth in food and beverage revenue.
Do not miss: After collapsing 80% from the peak, AMC stock is recovering slightly as earnings beat expectations.
And Chief Executive Adam Aron has been optimistic about upcoming blockbuster movies, including Top Gun: Maverick, Jurassic World Dominion, Black Panther: Wakanda Forever, and Avatar 2.
Eric Handler, an analyst at MKM Partners, said the box office should improve this year and AMC’s new initiatives, such as the launch of delivery and off-premise popcorn offerings, are making progress. But even with shares trading about 81% below the June 2, 2021 record close of $62.55, he said the valuation remains “irrational.”
Handler reiterated the sell rating and $1 price target he’s had on the stock since February 2021.
“[W]We remain concerned about the slower-than-expected pace of the cinema industry’s overall recovery, most notably a 30% decline in content volume driven by a lack of mid-level films,” Handler wrote in a note to clients . “Also, specifically for AMC, it could take many years for the company to grow into its capital structure, which has seen its outstanding shares rise 400% and a substantial $5.57 since the pandemic began [billion] of debt.”
The increase in outstanding shares resulted from the company using the rise in the price of “meme stock” to issue shares to raise money. A portion of that sum was used for the surprise investment in silver and gold miner Hycroft Mining Holding Corp. HYMC used.
announced in March.
And Aron hinted on the earnings call with analysts late Monday that “there will be more Hycrofts, not gold or silver mining per se.”
Wedbush’s Alicia Reese reiterated the underperform rating she has held on the stock since November 2021, but lowered her price target to $4 from $5.
Reese expects theater attendance to “sensibly improve” as the year progresses, but said AMC will struggle with a path to recovery riddled with higher marketing spend, higher concession and utility costs, and higher wages.
Reese believes the stock will remain volatile, with an “uncertain long-term multiple,” given its ownership and the possibility that AMC will eventually launch its own cryptocurrency.
Handler from MKM and Reese from Wedbush are just two of five analysts down on AMC out of a total of eight polled by FactSet. There are no bulls as the other three analysts are neutral.
The average target price of the polled analysts is $5.76, or about 51% below current levels.
B. Riley analyst Eric Wold is one of the neutral analysts and has the Street’s highest price target at $16. While that price target now implies an increase of about 35% from current levels, and despite a “solid” first-quarter report, an uncertain outlook keeps it from getting bullish.
“While we are increasingly positive following positive Q1 22 results, we are not making any significant changes to our estimates for 2022 or 2023, having taken a somewhat more cautious stance for the remainder of the year given evolving trends and inflation -/Labor market headwinds persist,” Wold wrote in a research note.
Despite the stock’s plunge from its record closing price, it’s still up 17.8% over the trailing 12 months, while shares of fellow meme stock GameStop Corp. GME,
are down 36.4% and the S&P 500 Index SPX,
https://www.marketwatch.com/story/amc-stock-reverses-lower-after-earnings-report-but-wall-street-analysts-think-the-price-is-still-too-high-11652199729?rss=1&siteid=rss AMC stock turns lower after earnings report, but Wall Street analysts think the price is still too high