Font size
AMC Entertainment will report fourth-quarter earnings on Wednesday.
Angela Weiss / AFP via Getty Images
Cinema operators hope the proliferation of vaccinations and relaxed restrictions on public gatherings will help their business bounce back from a bleak 2020, but not all chains are the same.
AMC Entertainment
Holdings (ticker: AMC), the largest US theater operator, has raised more than $ 1 billion in cash since the fall through stock sales and convertible debt transactions to build a buffer until things can return to normal. But that puts it at a disadvantage, said Richard Greenfield of LightShed Partners.
The analyst started AMC stock on a sale on Wednesday and set a price target of 1 cent, saying the multiple of the company is unjustified given its debt burden and cash flow.
The company is likely to discuss its expectations regarding the impact of mass vaccinations and the reopening of the economy when it reports earnings after the bell Wednesday night. Last month, CEO Adam Aron said that the reopening of New York City cinemas – with some Covid-related restrictions – was “another important step toward restoring the health of the movie theater industry and our company.” In January, Aron ruled out the need to file for bankruptcy, after the company raised more money.
AMC stocks, which have caught up in the Robinhood trading frenzy, rose 13.2% in volatile trading Wednesday. But they lost momentum, rising just 2.4% to $ 10.75 on a recent check. They are up about 400% so far this year compared to the
S&P 500’s
4% profit since the beginning of the year.
According to Greenfield’s calculations, at Tuesday’s $ 10.50 closing price, AMC stock is trading at more than 15 times its estimated adjusted earnings for 2022 before interest, taxes, depreciation and amortization, or Ebitda. And that Ebitda “is in secular decline from then on, with no essentially no free cash flow and debt-to-EBITDA of more than 8x,” he said in a note.
He called the stock “dramatically overvalued.”
Analysts tracked by FactSet expect AMC to report a loss of $ 3.24 per share for the quarter in the fourth quarter on poor sales of $ 142.3 million. For the full year 2020, the forecast is a loss of $ 31.18 per share on sales of $ 1.2 billion.
For the full year 2019, AMC reported a loss of $ 1.08 per share on revenue of $ 5.55 billion. In 2019, AMC reported an adjusted Ebitda of $ 771 million, Greenfield said, but predicts the same statistic will struggle to reach $ 600 million by 2022.
It’s not just a persistent reluctance on the part of some moviegoers to return to personal theaters without knowing the vaccine status of those around them, he argued. Hollywood studios have changed consumer habits by releasing new movies via on-demand, streaming at home, and reducing or shrinking the window of theatrical releases.
That means that forecasting sales at the till for AMC’s domestic and international screens is tricky. Greenfield estimates a high single digit gain for 2019 for AMC domestic sales in 2022 (ignoring 2020 and 2021 due to the pandemic). But he adds, “It really feels like it could be a lot worse.”
Write to [email protected]